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Econ Wrap-Up: Factory Orders

5/4/2015
By Jennifer Coombs

Thanks to higher orders for aircraft and motor vehicles, March factory orders increased by 2.1% over February and were in-line with consensus estimates. February’s reading was initially at +0.2% which was revised lower to -0.1% and ultimately March’s monthly gain marks the end of a 7-month losing streak. Those seven consecutive months of declines provide the most striking evidence of just how difficult business has been in the manufacturing sector, primarily since the stronger dollar weakened exports and lower oil prices troubled the energy sector. Nevertheless, the sector got a big boost by new orders in civilian aircraft while motor vehicle and parts order increased by 6.0% over the prior month for one of the strongest gains during the recovery. However, when major transportation orders are excluded, core orders were unchanged compared to a 0.1% gain in February, with the latter revised down sharply from an initial reading of +0.8%. Energy equipment orders rebounded by 4.8% in the month, following a long streak of declines including an 18.5% drop in February. This is good evidence for some stabilization in the energy sector soon. Ultimately, the pop in March ends Q1-2015 on a positive note for the factory sector, but the early outlook for Q2-2015, which is expected to get an outsized boost thanks to the end of extreme winter weather, has not been favorable noting that regional (Fed districts) and industry reports (ISM) all reporting softness. The main takeaway continues to be that the factory sector is still a big drag on economic growth.

 

Jennifer Coombs
Wall Street Strategies

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