WASHINGTON – Orders to U.S. factories for big-ticket manufactured goods slumped 1.1% 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% 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% in February following solid gains of 0.6% in January and 1.5% in December.
The volatile transportation sector fell 1.6% with demand for commercial aircraft, a sector plagued by the huge drop in air travel during the pandemic, shooting up 103%. 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% with numerous plants shutdown due to a global shortage of semiconductors, a critical component used in cars and trucks.
The 0.8% decline in demand for nondefense 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 U.S. 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% to 15% in the first quarter.
The report Wednesday showed that excluding transportation, orders would still have fallen by 0.9% in February. Demand for primary metals such as steel slipped 0.5% while orders for machinery fell 0.6%. Demand for computers and related products declined 1.9%.