Ugly trend!
Factory Orders in U.S. Unexpectedly Decline for Second Month
By Alex Kowalski - Jun 4, 2012 10:17 AM ET
Orders to U.S. factories unexpectedly fell in April for a second month, pointing to a deceleration in manufacturing as the global economy cools.
Bookings dropped 0.6 percent after a revised 2.1 percent decrease in March, the first back-to-back declines in more than three years, figures from the Commerce Department showed today in Washington. Economists projected a 0.2 percent gain, according to the median forecast in a Bloomberg News survey.
Slowdowns in Europe and parts of Asia combined with a cooling in business spending in the U.S. following a reduction in a government tax credit may limit manufacturing this year. A falloff in hiring may also be causing American households to curb spending on big-ticket items like autos, eliminating another source of strength.
“We’re in a period now where the economy is cooling,” said Robert Dye , chief economist at Comerica Inc. in Dallas, who projected orders would drop. “Businesses are getting more defensive as they think about the uncertainty they face the rest of this year.”
Stocks initially extended earlier losses after the report and then recovered the lost ground. The Standard & Poor’s 500 Index fell 0.2 percent to 1,275.04 at 10:15 a.m. in New York.
Estimates for total factory orders in the Bloomberg survey of 61 economists ranged from a decline of 1 percent to an increase of 1.1 percent. The Commerce Department revised the March figure from a previously estimated 1.9 percent decrease.
Consecutive Declines
The last time bookings decreased in consecutive months was in January and February 2009.
Excluding transportation equipment, factory orders fell 1.1 percent in April after a 0.7 percent decrease the prior month.
Bookings for durable goods, those meant to least at least three years, were unchanged in April, less than the 0.2 percent gain the government reported on May 24. Demand for non-durable goods, including petroleum, dropped 1.1 percent.
Orders for capital goods excluding aircraft and military equipment, a measure of future business investment, decreased 2.1 percent after falling 2.3 percent in March, bigger declines than the government reported last month.
Shipments of such equipment, which are used in calculating gross domestic product, dropped 1.5 percent after a 1.8 percent gain the prior month.
Business investment has cooled in recent months, offering less of a lift to the expansion. The U.S. economy grew at a 1.9 percent annual rate in the first quarter after advancing at a 3 percent pace in the last three months of 2011. Spending on equipment and software added 0.3 point to growth, smaller than any contribution last year.
Tax Credit
The expiration at the end of 2011 of a tax incentive allowing 100 percent depreciation on equipment purchases may have prompted a slowdown in investments this year. The allowance for 2012 is 50 percent.
Foreign demand will also probably weaken as economies elsewhere lose momentum. Growth in the 17-nation euro region stagnated in the first quarter from the same time in 2011. China’s economy expanded 8.1 percent in the first three months of 2012 from a year earlier, the slowest pace in 11 quarters.
Motor vehicles and parts orders decreased 0.5 percent in April after a 2 percent gain, today’s report showed.
Sales of cars and light trucks slowed to a 13.7 million annual rate in May, the weakest so far this year, industry data from Ward’s Automotive Group showed last week. Purchases in the first four months of 2012 ran at the fastest pace in four years.
more:
http://www.bloomberg.com/news/2012-06-04/factory-orders-in-u-s-unexpectedly-decline-for-second-month.html
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