Factory Orders Rise In March

Factory orders rose a solid 1.1 percent in March but follow a downward revised 1.9 percent decline in February. Durable goods orders are unrevised from last week's advance report at plus 0.8 percent while non-durable goods, the fresh data in today's report, rose 1.6 percent and reflect price increases for energy products.

March's report got a major lift from a 49 percent jump in defense goods which, reflecting gains for defense aircraft, contributed to a 2.8 percent boost for transportation. But the gain for transportation masks a 0.9 percent decline for vehicle orders and a 5.7 percent decline for civilian aircraft. Excluding transportation, factory orders rose 0.8 percent vs a 0.9 percent decline in the prior month. This is the first gain for ex-transportation since October and the largest since June 2014.

Softness in orders is centered in capital goods where the core reading inched only 0.1 percent vs February's 2.7 percent drop. Shipments of core capital goods, which are an input into GDP's business investment component, did rise 0.5 percent but follow declines of 1.8 and 1.4 percent in February and January.

Total shipments rose 0.5 percent in March but again follow declines in the prior two months. Unfilled orders slipped 0.1 percent following a 0.4 percent decline in February in readings of special concern. Inventories, which are heavy given the overall softness, rose 0.2 percent but the build did not change the inventory-to-shipment ratio which held at 1.37.

The factory sector has yet to get much lift from dollar depreciation and an expected gain for exports, though anecdotal indications on export orders did show isolated gains for April.

Recent History Of This Indicator:
Factory orders are expected to rise 0.6 percent in March based on a 0.8 percent gain for the advance durable goods report which got a boost from defense spending. But otherwise the durables report was soft and failed to show any lift yet from the lower dollar or any rebound in the energy sector. The factory orders report includes revised data on durable goods and initial data on non-durable goods.