US durable goods orders drop a sharp 2.1% in April, investment spending also falls.
WASHINGTON — Orders to U.S. 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 Commerce Department said Friday that orders for durable goods — or items meant to last at least three years — fell 2.1%, after rising 1.7% in March, which was revised lower from a previous estimate of a 2.6% gain. Orders also fell steeply in February.
The report prompted numerous economists to take a more bearish view of the economy in the April-June quarter. Michael Feroli, an economist at JPMorgan Chase, slashed his forecast for second quarter growth to an annual rate of just 1%, from an earlier estimate of 2.25%.
“Uncertainty related to the trade war may be finally sapping business confidence,” Feroli said. “Second, disappointing global growth developments appear to be, once again, restraining domestic activity growth.”
Feroli also noted that Friday’s report covered April, which was before Trump hiked tariffs on $200 billion in Chinese goods to 25% from 10% in early May.
Other economists lowered their forecasts, though not as dramatically. Macroeconomic Advisers, a forecasting firm, cut its estimate for second quarter growth to just 1.7% from 1.9%. Goldman Sachs trimmed its outlook to 1.3% from 1.5%.
The downgrades suggest that growth is fading after growth clocked in at 3.2% in the first quarter. That figure was boosted by one-time factors, such as a large increase in goods held on store shelves and in warehouses.
Aircraft orders, typically a volatile category, plummeted 25.1% in April after a more modest gain of 7.8% in the previous month. That likely reflected troubles with Boeing’s MAX aircraft, which has been grounded by global regulators. Orders for cars and auto parts fell 3.4%, the biggest drop in nearly a year.
A category that tracks business investment declined 0.9%, the most since December. Demand for communications equipment and steel, aluminum and other metals fell, while orders for machinery barely rose.
The data suggest companies are spending less on big-ticket items, in part because of the trade war. Americans are also purchasing fewer cars, forcing automakers to pare back activity. Higher interest rates and additional competition from late-model used cars has reduced sales.
Manufacturing output has weakened in the past year. Factory output fell in April, according to a report by the Federal Reserve. Factory production has increased just 0.9% in the past 12 months.
The U.S. and China appear to be digging in for a long trade fight. The duties on Chinese imports cover many industrial parts and components, which has raised costs for manufacturers.