US factory orders rose 0.7 per cent in April, offering sign of manufacturing rebound

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WASHINGTON – Orders to U.S. factories rose for a third consecutive month in April, adding to evidence that manufacturing is regaining momentum after a harsh winter.

Orders increased 0.7 per cent in April, pushed higher by a surge in demand for military hardware, the Commerce Department reported Tuesday. That followed a 1.5 per cent increase in March and a 1.7 per cent climb in February.

The improvements followed two big declines in January and December, which partly reflected a harsh winter. A key category viewed as a proxy for business investment plans fell by 1.2 per cent in April, though that drop came after a 4.7 per cent surge in March.

The three solid monthly gains in factory orders should provide support to the overall economy, which is expected to stage a robust rebound in the April-June quarter.

The economy, as measured by the gross domestic product, shrank at an annual rate of 1 per cent in the January-March quarter, reflecting winter storms that disrupted business activity. But in the current quarter, analysts estimate GDP will advance at an annual rate as high as 3.8 per cent.

Economists say that growth will remain strong in the second half of this year as consumer spending benefits from rising employment, which is providing households with more income.

The report on factory orders showed that demand for durable goods, items expected to last at least three years, increased 0.6 per cent in April. Orders for non-durable goods such as paper and chemicals rose 0.7 per cent in April after a drop of 0.5 per cent in March.

The overall increase reflected a sharp rise in demand for defence products including airplanes and communications equipment. Excluding defence, orders fell 0.1 per cent in April.

Transportation orders grew 1.4 per cent despite the fact that orders for commercial aircraft, a volatile category, dropped 7.9 per cent and demand for autos and auto parts slipped 0.2 per cent.

Demand for machinery fell 2.8 per cent, with orders for construction equipment down 7.2 per cent. Orders for computers dropped 13.2 per cent, while demand for electrical appliances and other electrical products rose 1.3 per cent.

Economists expect factory activity will strengthen in coming months, helped by rising consumer demand and a rebound in U.S. export sales.

The Institute for Supply Management reported Monday that its manufacturing index showed a rise in May to a solid reading of 55.4. Any reading above 50 indicates expansion in the manufacturing sector.

The data suggested that manufacturing is expanding at a healthy pace and should help the economy recover from its weak start at the beginning of the year.

In other encouraging news, a separate report this week showed that the contraction in China’s manufacturing sector eased in May. It was the latest sign that the slowdown in the world’s second biggest economy is stabilizing.

China’s economy has slowed from double digit rates of expansion, with growth falling to 7.4 per cent in the first quarter as leaders try to reduce dependence on trade and investment in favour of domestic consumption. The slowdown had raised concerns about export growth in other nations including the United States.

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