Factory orders in US decrease on pullback in aircraft

Growth Slows

The world’s largest economy grew at a 2.2 percent annual rate in the first quarter after expanding at a 3 percent pace in the last three months of 2011, a Commerce Department report showed last week. A 1.7 percent gain in business investment on new equipment, the smallest increase of the expansion that began almost three years ago, limited the advance.

Factory inventories rose 0.3 percent in March, and manufacturers had enough goods on hand to last 1.33 months at the current sales pace, the same as in February.

A 0.4 percent increase in unfilled orders for non-military capital goods excluding aircraft in March may be one reason why the purchasing managers report yesterday showed production picked up in April.

The Institute for Supply Management’s factory index rose to 54.8 from 53.4 in March, the Tempe, Arizona-based group said yesterday. Readings above 50 signal growth.

“While North America demand was strong in the first quarter compared to a year ago, we are seeing a few signs of weakness in recent order intake,” Pat Ward, chief financial officer at Cummins Inc., said yesterday on an earnings call in reference to the company’s power generation unit.

Auto Demand

Improving demand for autos is underscoring the strength in manufacturing. Cars and light trucks sold at a 14.38 million annual rate last month after a 14.32 million pace in March, according to industry data. Auto sales have exceeded a 14 million annual pace in each of the past four months, marking the best performance since early 2008.

Dow Chemical Co. Chief Executive Officer Andrew Liveris last week said global demand for Dow’s products improved through the first quarter as the U.S., Germany and other developed economies more than made up for lower-than-expected sales in China. Dow is seeing “positive signs” in transportation, construction, electronics and manufacturing, he said in an April 26 interview.

“March showed quite a lot of strength compared with February,” Liveris said. “The momentum continues” into the second quarter, he said.

Bloomberg News

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