February factory orders rise 1.6%

But business-plan indicator takes 2nd drop in 3 months

Crates containing engine and transmission parts are stacked on shelves at Volvo Trucks’ powertrain manufacturing facility in Hagerstown, Md., last month. Factory orders rose 1.6 percent in February, the Commerce Department said.
Crates containing engine and transmission parts are stacked on shelves at Volvo Trucks’ powertrain manufacturing facility in Hagerstown, Md., last month. Factory orders rose 1.6 percent in February, the Commerce Department said.

WASHINGTON - Orders to U.S. factories rose in February after two months of declines but a critical category that signals business investment plans fell.

Factory orders rose 1.6 percent in February, the most in five months, after declines of 1 percent in January and 2 percent in December, the Commerce Department reported Wednesday. The February gain reflected a rebound in orders for commercial aircraft and autos. Orders in both categories had fallen for two consecutive months before rebounding in February.

But demand for core capital goods, considered a good guide to business investment plans, fell 1.4 percent in February, the second decline in three months.

Many economists say that was due in part to a severe winter, which caused businesses to postpone plans to expand or modernize their operations.

In February, demand for durable goods, items expected to last at least three years, rose 2.2 percent, matching a preliminary estimate last week. Orders for nondurable goods such as chemicals, paper and food rose 1 percent after a 0.7 percent drop in January.

Demand for commercial aircraft rose 13.4 percent while orders for motor vehicles and parts increase 3 percent. Orders for primary metals such as steel increased 1.7 percent while orders for computers soared 64.2 percent, rebounding from a 48.2 percent drop in January.

Orders for machinery fell 1.2 percent with demand for construction equipment and mining and oil field equipment both down.

Economists believe that unusually severe weather depressed activity in the winter. They are looking for a rebound in orders and production in coming months as the weather improves.

Some encouraging signs include reports that U.S. manufacturing grew at a slightly faster rate in March compared with February. And automakers reported Tuesday that sales rose 6 percent in March, far outpacing analysts’ expectations.

The Institute for Supply Management reported Tuesday that its manufacturing index increased to 53.7 in March, up from 53.2 in February. Any reading above 50 indicates expansion.

That rise was viewed as evidence that factories are recovering from disruptions caused by the severe winter. Manufacturing activity had plunged in January as snowstorms shut down factories and disrupted supply shipments. It rebounded slightly in February as measured by the ISM index.

The Federal Reserve’s report on factory production showed the biggest increase in output in six months in February as factories cranked out more cars, home electronics and chemicals.

Analysts expect overall economic growth slowed to between 1.5 percent and 2 percent in the first three months of this year, reflecting weather disruptions and efforts by businesses to work down unwanted stockpiles. But economists are looking for a sharp rebound in growth to around 3 percent for the rest of the year.

Companies boosted payrolls in March by the most in three months, adding to evidence that the job market is also recovering from the harsh winter weather, a private payrolls report showed.

The 191,000 increase in employment came after a revised 178,000 gain in February that was stronger than initially estimated, according to the ADP Research Institute in Roseland, N.J. The median forecast of economists surveyed by Bloomberg called for a 195,000 advance.

The figures show companies are gaining confidence that demand will strengthen from earlier in the year when colder-than-normal temperatures and snowstorms prompted Americans to cut back. Further gains in employment and wage growth will help set the stage for a pickup in household spending, which accounts for almost 70 percent of the economy.

“We’re starting to see the recovery in the data that we’ve been hoping for,” Brett Ryan, an economist with Deutsche Bank Securities Inc. in New York, said before the report. “This is going to provide policy makers and market participants alike a modicum of confidence that the data swoon over the last couple months is weather-related and not a sign of something more ominous.” Information for this article was contributed by Martin Crutsinger of The Associated Pres and Lorraine Woellert of Bloomberg News.

Business, Pages 23 on 04/03/2014

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