WASHINGTON (AP) -- Orders to U.S. factories likely fell in March, which would raise questions about future prospects for manufacturing companies.
Economists are forecasting that factory orders will drop 2.5 percent, according to a survey by FactSet. The Commerce Department will release the report at 10 a.m. EDT Friday.
The expected setback would nearly erase February's 3 percent gain.
A preliminary report on long-lasting manufactured goods showed that much of the decline reflected a steep drop in commercial aircraft orders.
The initial look at orders for durable goods will be updated and the government will also supply an estimate of demand in March for nondurable goods, items such as chemicals, paper and petroleum.
The preliminary report showed weakness in a category that is viewed as a good proxy for business investment plans. So-called core capital goods fell by 0.2 percent in March, according to the government's preliminary estimate.
Weaker economies overseas and the impact of across-the-board government spending cuts have made businesses more cautious, reducing demand for manufactured goods.
The Institute for Supply Management reported this week that factory activity expanded at a slower pace in April, held back by weaker hiring and less company stockpiling.
The ISM manufacturing index slipped to 50.7, down from 51.3 in March. A reading above 50 indicates expansion but it was the weakest reading this year.
However, there are areas of strength. Last month, U.S. auto sales reached their highest level for any April since 2007. Sales grew 8.5 percent to nearly 1.3 million. And on Thursday, Ford Motor Co. said it will add 2,000 workers to a Missouri plant that makes the F-150 pickup because of surging demand for trucks.
But overseas demand has been weak, in part because of a recession in the euro zone area, the 17 European countries that use the euro as their currency.
Factories may also see slower sales this spring because consumers are starting to feel the impact of higher Social Security taxes. Americans increased their spending from January through March at the fastest pace in more than two years. But spending on goods fell in March, a possible sign that the tax increase may be catching up with consumers, although some economists believe that lower gas prices will help offset the higher Social Security payroll tax.
The economy grew at an annual rate of 2.5 percent from January through March, the government said last week. While that was an improvement from the anemic growth of 0.4 percent in the final three months of last year, many economists expect growth will slow in the current quarter and remain subpar for most of the year due to the expected drag from the government budget cuts.
The Federal Reserve announced after its meeting this week that it planned to keep its low interest rate policies in place until it show more improvement in the labor market.