Factory Orders Numbers Indicate US GDP Slowing

Factory Orders Numbers Indicate US GDP Slowing

$DIA, $SPY, $QQQ, $VXX

February new orders for US factory goods fell, and business spending on capital goods was much weaker than expected, the latest indications that economic growth slowed further in Q-1.

Monday, the Commerce Department said new orders for manufactured goods declined 1.7%, as demand fell broadly, reversing January’s downwardly revised 1.2% increase.

Orders have declined in 14 of the last 19 months. They were previously reported by the government agency to have increased 1.6% in January.

The report added to weak consumer spending and trade data in suggesting economic growth moderated further at start of the year after slowing to a 1.4% annualized pace in Q-4. Estimates for Q-1 GDP growth are currently below a 1% rate.

Manufacturing, which accounts for roughly 12% of the US economy, has been pressured by a strong USD, and weak global demand, which have undermined exports of factory goods, as well as efforts by businesses to reduce an inventory overhang.

The sector has also been hammered by investment cuts by energy firms as they adjust to reduced profits from cheap Crude Oil.

After gaining about 20% Vs the currencies of the United States’ main trading partners between June 2014 and December 2015, the Buck is flat on a trade-weighted basis YTD.

The US Commerce Department reported that orders for non-defense capital goods excluding aircraft fell by 2.5% in February instead of the 1.8% drop reported last month.

Shipments of core capital goods, which are used to calculate business equipment spending in the GDP report, fell 1.7% in February and not 1.1% as previously reported.

Inventories of factory goods dropped for an 8th straight month, suggesting factories were making progress in reducing the inventory glut. While that could support future manufacturing production, it suggests inventories will again be a drag on economic growth in Q-1.

Weak core capital goods shipments and declining factory inventories could prompt economists to trim their Q-1 GDP growth estimates.

The inventories-to-shipments ratio was 1.37 in February, unchanged from the prior month.

Unfilled orders at factories fell 0.3% in February, while shipments of manufactured goods fell 0.7.

Monday, US major stock market indexes finished at: DJIA -55.75 at 17737.00, NAS Comp -22.75 at 4891.79, S&P 500 -6.65 at 2066.13

Volume: Trade was light with about 800-M/shares exchanged on the NYSE.

• Russell 2000 -2.4% YTD
• NAS Comp -2.3% YTD
• S&P 500 +1.1% YTD
• DJIA +1.8% YTD

Stay tuned…

Paul Ebeling

HeffX-LTN

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