Manufactured goods orders tumbled 1.1 per cent last month

WASHINGTON — Orders to US factories for big-ticket manufactured goods slumped 1.1 per cent in February with demand in a key sector that tracks business investment also dropping.

Orders had been rising for nine consecutive months, including a sizable 3.5 per cent jump in January, according to the Commerce Department.

The size of the drop surprised economists, though it is likely that there was significant disruption from severe winter storms that hit much of the country last month, on top of ongoing supply-chain problems.

The category that covers business investment dropped 0.8 per cent in February following solid gains of 0.6 per cent in January and 1.5 per cent in December.

The volatile transportation sector fell 1.6 per cent with demand for commercial aircraft, a sector plagued by the huge drop in air travel during the pandemic, shooting up 103 per cent. Contributing was beleaguered manufacturer Boeing, which for the first time since December 2019 booked positive net orders.

But orders for autos and auto parts slumped 8.7 per cent with numerous plants shutdown due to a global shortage of semiconductors, a critical component used in cars and trucks.

The 0.8 per cent decline in demand for non-defense capital goods excluding aircraft, the category that serves as a proxy for business investment plans, was blamed on weather disruptions. Economists predicted a rebound in coming moths as businesses boost their investment spending in response to falling virus cases and President Joe Biden’s $1.9 trillion support package.

“With the weather returning to seasonal norms and the next fiscal stimulus payments already being distributed, orders likely will rebound in March,” said Andrew Hunter, senior US economist at Capital Economics. “With corporate borrowing costs still close to historic lows … we expect investment to continue expanding at a robust pace over the coming months.”

Hunter expects an annualized gain in business equipment investment of 10 per cent to 15 per cent in the first quarter.

The report Wednesday showed that excluding transportation, orders would still have fallen by 0.9 per cent in February. Demand for primary metals such as steel slipped 0.5 per cent while orders for machinery fell 0.6 per cent. Demand for computers and related products declined 1.9 per cent.