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US durable goods orders rebounds, but investment still weak

WASHINGTON – Orders to U.S. factories for long-lasting manufactured goods rose in March, but a key category that tracks business investment plans was weak for a second month.

Orders for durable goods increased 0.8 per cent, rebounding partially from a 3.1 per cent tumble in February, the Commerce Department reported Tuesday. The result was fueled by a jump in demand for military equipment, a volatile category.

Excluding defence, durable goods orders would have fallen 1 per cent in March.

Demand in a category that serves as a proxy for business investment plans was flat in March after a 2.7 per cent drop in February.

Jenifer Lee, senior economist at BMO Capital Markets, called the March orders report “very disappointing,” with business investment soft as the first quarter ended.

She noted that the investment category has risen only once in the past five months. The flat reading in March indicated “little-to-no momentum” heading into the second quarter, she said.

Manufacturing has been under pressure for the past year, reflecting global weakness, a strong dollar and falling oil prices.

Prospects for 2016 remain uncertain. Some economists believe that U.S. factories should see a pickup in demand since the dollar has stopped strengthening against other currencies. The global economy also seems to have stabilized after a shaky start to the year. But other analysts are uncertain about how long it might take for manufacturing to bounce back.

For March, overall defence orders surged by 38.6 per cent, led by a 65.7 per cent increase in demand for military aircraft and parts. But the 1 per cent decline in demand outside of defence reflected weakness in a number of areas.

Orders for commercial aircraft, another volatile category, fell 5.7 per cent following a 26.6 per cent drop in February. Orders for motor vehicles and parts dropped 3 per cent. Demand for appliances and other electrical equipment also declined 3 per cent.

Demand for primary metals such as steel rose 0.8 per cent, and demand for machinery was up 0.5 per cent.