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U.S. factory orders jump
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May 2, 2001: 11:13 a.m. ET
Big gain in transportation sector leads better-than-expected March increase
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NEW YORK (CNNfn) - Orders received by U.S. factories rose in March, the government said Tuesday, a larger-than-expected jump led by a big gain in orders for transportation equipment.
Factory orders rose 1.8 percent to a seasonally adjusted $370.52 billion -- the largest gain since June 2000 -- after falling a revised 0.1 percent in February, the Commerce Department report said.
Wall Street economists polled by Briefing.com had forecast a 1.4 percent increase for March. February orders were revised from the 0.4 percent drop originally reported, the agency said.
Transportation equipment orders, particularly ships and tanks for the defense industry, posted an enormous gain of 24.8 percent. Within that category, orders for aircraft, missiles and space vehicles rose a sharp 24.4 percent while orders for shipbuilding and tanks rose a whopping 936.3 percent.
Excluding those volatile transportation orders, total factory orders actually fell 1.2 percent to $318 billion. Orders for electronics, industrial machinery and nondurable goods all were down.
Inventories also fell 0.6 percent, the government said, the largest drop since December 1998, another sign that companies are unloading their inventory.
Looking for positive signs
The news comes a day after the National Association of Purchasing Management said U.S. manufacturing shrank at a slower pace in April and only a few days after the government reported the nation's first-quarter gross domestic product was stronger than expected, positive signs for manufacturing and the U.S. economy as a whole.
Economists are looking for signs of an end to the U.S. economic slowdown, which has done the most damage to the manufacturing sector. The Federal Reserve has cut interest rates four times this year in an effort to pump life into the economy and avoid a recession.
Economists warned that, while the data are encouraging signs for the future health of manufacturing and the economy, the bloated gain in the transportation sector should temper any hopes for a speedy recovery.
"These data provide some encouraging news for the factory sector, as unwanted inventories are being worked off and shipments have bounced," said Steven Wood, chief economist with Financial Oxygen.
"However, the jump in new orders was too narrowly concentrated in civilian aircraft and defense orders to offer much more than modest encouragement," Wood said. "Although the worst may be over for the manufacturing sector, any recovery is likely to be sluggish."
Stock and bond markets showed little reaction to the report. The Dow fell by less than 1 percent, while the Nasdaq inched up by less than 1 percent. U.S. Treasurys fell slightly. 
- from staff and wire reports
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