New orders for US-manufactured goods fell for a second straight month in February amid ebbing demand for civilian aircraft and there were signs that business spending on equipment remained weak in the first quarter.

Factory orders dropped 0.7 per cent after decreasing 2.1 per cent in January, the Commerce Department said on Tuesday (Apr 4). Economists polled by Reuters had forecast orders falling 0.5 per cent. Orders increased 3.0 per cent on a year-on-year basis in February.

Rising borrowing costs as the Federal Reserve fights high inflation have cooled demand for goods, which are typically bought on credit. Demand could come under pressure following the recent failure of two regional banks, which stressed the financial sector.

The Institute for Supply Management reported on Monday that its manufacturing PMI dropped in March to the lowest reading since May 2020. All subcomponents of the PMI fell below the 50 threshold for the first time since 2009.

Orders for transportation equipment fell 2.8 per cent after diving 14.0 per cent in January. Motor vehicle orders rose 0.8 per cent, but were outpaced by a 6.6 per cent plunge in bookings for civilian aircraft. Orders for machinery dropped 0.6 per cent, while bookings for computers and electronic products edged up 0.1 per cent. Orders for electrical equipment, appliances and components increased 0.7 per cent.

Shipments of manufactured goods fell 0.5 per cent after rising 0.3 per cent in January. The inventory of manufactured goods at factories slipped 0.1 per cent for a second straight month. Unfilled orders at factories dipped 0.1 per cent after being unchanged in the prior month.

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The Commerce Department also reported that orders for non-defence capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, fell 0.1 per cent in February instead of gaining 0.2 per cent as reported last month.

Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, slipped 0.1 per cent instead of being unchanged as previously reported. Business spending on equipment contracted in the fourth quarter. REUTERS