BUSINESS

US factory orders up 1 per cent in April with business investment up for second straight month

06/05/2013 10:14 EDT | Updated 08/05/2013 05:12 EDT
WASHINGTON - Orders to U.S. factories rose modestly in April as manufacturers rebounded from a weak March performance.

Factory orders rose 1 per cent in April compared with March when orders had dropped a sharp 4.7 per cent, the Commerce Department said Wednesday. The big swing reflected volatility in commercial aircraft orders, which were down sharply in March but surged 53.3 per cent in April.

In a hopeful sign, orders in a category viewed as a proxy for business investment spending posted a moderate 1.2 per cent rise following a 1.1 per cent gain in March. This category had fallen 4.8 per cent in February.

More spending by businesses could ease fears that manufacturing will be a drag on the economy later this year.

April's increase pushed orders to $474 billion, 1.7 per cent higher than a year ago.

Orders for long-lasting goods ranging from computers to battleships rose 3.5 per cent in April compared with March following a 5.9 per cent decline in March. Orders for nondurable products such as paper, chemicals and food fell 1 per cent in April after a 3.5 per cent March decline. The decline in nondurable products primarily reflected falling energy prices.

In the durable goods area, orders for transportation products were up 8.4 per cent, reflecting gains not only in demand for commercial aircraft but also motor vehicles and cars and defence aircraft. Excluding transportation, orders would have edged down a tiny 0.1 per cent in April, a better showing than March when orders excluding transportation fell 2.8 per cent.

Factories had been seeing fewer orders at the start of the year, in part because slower global growth had reduced demand for U.S. exports. Economists had also worried that across-the-board federal spending cuts and higher taxes might prompt businesses to cut back on orders.

Manufacturing output dropped 0.4 per cent last month as auto companies cranked out fewer cars, factories made fewer consumer goods and most other industries reduced output.

And a measure of manufacturing activity fell in May to its weakest level since June 2009, the last month of the Great Recession.

The overall economy grew at an annual rate of 2.4 per cent in the January-March quarter. But economists say growth is slowing to around a 2 per cent rate in the current April-June quarter.

One bright spot for the economy has been the American consumer, who has shown surprising resilience this year despite paying higher Social Security taxes.

Consumer spending rose from January through March at the fastest pace in more than two years. Auto sales have been rising over the past year with consumers buying 1.4 million cars in May, up 8 per cent from the sales pace a year ago.

A better job market and a sustained recovery in housing have helped soften some of the impact of the tax increase. Since November, employers have added an average 208,000 jobs a month. That's up from just 138,000 jobs a month during the previous six months.