U.S. factory orders fall for the fourth time in five months

The numbers: Factory orders in the U.S. fell in February for the fourth time in five months, reflecting a slowdown in the economy that began late in 2018 and carried on through the early part of the new year

Orders dropped 0.5% in the month, the government said Monday. Economists polled by MarketWatch had forecast a 0.4% decline.

There are some signs that business might be re-accelerating as spring gets underway, but more evidence is needed.

What happened: Orders for durable goods — products meant to last at least three years — fell by an unrevised 1.6% in February. These products include autos, airplanes, appliances, computers and the like.

Orders for nondurable goods such as clothes, paper and processed foods rose 0.6%. They account for about half of all factory orders.

A closely followed gauge of business investment — known as core orders for durable goods — fell slightly. They’ve fallen three of the past four months.

Orders for manufactured goods were revised to show no increase in January instead of a 0.1% gain.

Big picture: Manufacturers are still expanding, but they’ve turned more cautious since last summer. U.S. trade tensions with China, a weaker global economy and stronger dollar have combined to dampen demand and force businesses to reevaluate their plans.

The manufacturing segment is still influential enough to act as a drag on growth, but the service side of the economy is much larger and it’s expanding a bit faster. The U.S. is still on track to set a record for longest economic expansion ever by early summer.

What they are saying? “Investment spending has been a clear victim of the uncertainty generated by the trade war since mid-2018, and that continued through the end of 2018,” said Thomas Simons, senior money market economist at Jefferies LLC. “2019 is getting off to a better start, but there is still so much uncertainty surrounding the trade war that there are certainly downside risks ahead.”

Market reaction: The Dow Jones Industrial Average DJIA, -0.47% and S&P 500 SPX, -0.18% fell in Monday trades, jeopardizing a five-day winning streak.

The 10-year Treasury yield TMUBMUSD10Y, +0.04% rose a tick to 2.5%. Yet yields are still much lower compared to late last year, when they hit a seven-year high of 3.23%.

MarketWatch

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell