New orders for U.S.-made goods increased in March as the manufacturing sector continued to recover from the coronavirus pandemic after a dip in durable goods orders the previous month.

The Commerce Department reported Monday that orders for manufactured goods rose 0.5% to $256.3 billion in March following  a 0.9% decline in February.

The report also showed that orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans on equipment, increased 0.9% to $73.2 billion from a 0.8% decline in February that reflected bitterly cold temperatures in large parts of the country.

Economists polled by Reuters had expected a 1.5% jump in core capital goods orders.

“The strength in business spending … joined upbeat data on retail sales and the labor market in setting up the economy for what analysts expect will be its best performance this year in nearly four decades,” Reuters said.

Retail sales raced to a record high in March while factory activity measures are at multi-year highs, indicating continued strength in manufacturing, which accounts for 11.9% of the U.S. economy. Economists are predicting the government’s snapshot of first-quarter GDP on Thursday will likely show the economy grew at a 6.1% annualized rate.

Factory goods orders in December were boosted by strong demand for machinery, primary and fabricated metal products, as well as computers and electronic products. But orders for electrical equipment, appliances, and components dropped 1.5% and orders for transportation equipment fell 1.7%.

Orders for civilian aircraft tumbled 46.9% even though Boeing has said it received 196 aircraft orders last month compared to 82 in February.

“The response of capital spending to the COVID pandemic, with both orders and shipments of core capital goods at a record high, is encouraging for the outlook for 2021,” said Conrad DeQuadros, senior economic advisor at Brean Capital.

Reuters noted that “With households sitting on at least $2 trillion in excess savings, demand booming and inventories low, businesses are likely to continue investing in equipment to boost production, though raw material and input shortages could be an issue.”

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