New orders for US -made capital goods fell more than expected in April, further evidence that manufacturing and the broader economy were slowing after a growth spurt in the first quarter that was driven by exports and a buildup of inventories.
Orders to US factories for large manufactured goods fell sharply last month, pulled down by lower demand for commercial aircraft and cars, while businesses also pulled back on investment spending.
The report said durable goods orders tumbled by 2.1 percent in April after jumping by a downwardly revised 1.7 percent in March. Economists polled by Reuters had forecast core capital goods orders falling 0.3% in April.
Orders for long-lasting factory goods declined in April as business investment cooled while orders for civilian aircraft fell sharply amid problems with a major Boeing Co. airliner model. Core capital goods orders increased 2.6% on a year-on-year basis.
Meanwhile, orders for primary metals, telecommunications equipment and non-defense capital goods - a measure that can track oil prices and companies' plans for expansion - all fell. "There is nearly certainly more weakness coming", said chief economist Chris Low of FTN Financial.
The downward revision to March shipments suggests business spending was even weaker than initially estimated in the first quarter and could result in GDP growth for the quarter being trimmed when the government publishes its revision next week. Excluding transportation equipment, durable goods orders actually were essentially flat during the month as year-over-year growth fell to 0.1 percent.
The yearly pace of business investment slowed in April to 1.3% from 3.8%, marking the smallest 12-month increase since the final month of Barack Obama's presidency in January 2017. This reverses the 1.7 percent increase in the previous month and marks the second large decline in the past three months. That likely reflected troubles with Boeing's MAX aircraft, which has been grounded by global regulators.
Manufacturing output has weakened in the past year. Part of the reason why orders began to stall in the third quarter of 2018 is because of the tariffs that the US and China implemented in July 2018. Orders for non-defense aircraft plunged 25.1% after rising 7.8% in March. The U.S. central bank recently suspended its three-year interest rate hiking campaign and last month showed little desire to alter its monetary policy stance.
Overall durable goods shipments fell 1.6% in April, the most since December 2015.
Durable goods inventories rose 0.4% last month, boosted by stocks of motor vehicle and aircraft.