In another sign that U.S. economic growth slowed further in the first quarter, new orders for manufactured goods fell 1.7% to $454 billion in February.
The decline reported Monday by the Commerce Department was the third in the last four months and reversed January’s downwardly revised 1.2% increase.
Orders for “core capital goods” — non-defense capital goods excluding aircraft — fell 2.5% in February, downwardly revised from the initially reported 1.8% decline.
“This morning’s report suggests a more sluggish manufacturing sector in the early part of the quarter,” Barclays economist Jesse Hurwitz told Reuters.
Weak consumer spending and trade data also indicate that economic growth moderated further at the turn of the year after slowing to a 1.4% annualized pace in the fourth quarter, Reuters said. Economists are currently estimating that gross domestic product in the first quarter will likely grow below a 1% rate.
“Manufacturing, which accounts for about 12% of the economy, has been pressured by a strong dollar and weak global demand, which have undermined exports of factory goods, as well as efforts by businesses to reduce an inventory overhang,” Reuters said. “The sector has also been slammed by investment cuts by energy firms as they adjust to reduced profits from cheaper oil.”
However, the bottom may have been reached, with a survey last week showing manufacturing activity expanded in March for the first time in six months. Moreover, the dollar so far this year is flat on a trade-weighted basis, after gaining about 20% versus the currencies of the United States’ main trading partners between June 2014 and December 2015. Oil prices are also not declining as rapidly as before.
“We remain hopeful for some upcoming improvement in the data as many of these headwinds have either passed or faded,” JPMorgan economist Daniel Silver said. “We have also been encouraged somewhat by some other more timely manufacturing indicators that have turned more mixed lately following a period of more widespread and severe weakness.”