Ahead of the Bell: US factory orders

US factory orders expected to rebound in February following 2 months of declines

Associated Press
US factory orders rebound 1.6 percent in February

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In this March 26, 2014 picture, crates containing engine and transmission parts sit on shelves at Volvo Trucks' powertrain manufacturing facility in Hagerstown, Md. The Commerce Department releases factory orders for February, on Wednesday, April 2, 2014. (AP Photo/Patrick Semansky)

WASHINGTON (AP) -- The Commerce Department reports on U.S. factory orders in February. The report is scheduled to be released at 10 a.m. EDT Wednesday.

ORDERS DOWN: The forecast is that orders rose 1.2 percent in February, according to a survey of economists by FactSet.

STRING OF DECLINES: A rebound in February would follow two consecutive months of declines. Orders fell 0.7 percent in January and 2 percent in December.

Economists believe that an unusually severe weather depressed activity in the winter and they are hoping for a rebound in orders and production in coming months.

Some encouraging signs include reports that U.S. manufacturing grew at a slightly faster rate in March compared with February. And automakers reported that sales rose 6 percent to 1.5 million vehicles in March, far outpacing analysts' expectations.

The government report on February factory orders covers demand for durable goods, products expected to last at least three years, and nondurable goods such as chemicals, paper and food.

An advance report last week on durable goods found that overall orders rose 2.2 percent, the most in three months, reflecting a big rebound in orders for commercial aircraft, a volatile sector that often swings sharply from month to month.

But orders for core capital goods, a category that serves as a proxy for business investment, fell sharply in February, dropping 1.3 percent. That was the second setback in three months.

Analysts are hoping that the decline in business investment was influenced by the severe winter which may have led some industries to put modernization and expansion plans on hold.

The Institute for Supply Management reported Tuesday that its manufacturing index increased to 53.7 in March, up from 53.2 in February. Any reading above 50 indicates expansion.

That rise was viewed as evidence that factories are recovering from disruptions caused by the severe winter. Manufacturing activity had plunged in January as snow storms shut down factories and disrupted supply shipments. It rebounded slightly in February as measured by the ISM index.

The Federal Reserve's report on factory production showed the biggest increase in output in six months in February as factories cranked out more cars, home electronics and chemicals.

Analysts expect overall economic growth slowed to between 1.5 percent and 2 percent in the first three months of this year, reflecting weather disruptions and efforts by businesses to work down unwanted stockpiles. But economists are looking for a sharp rebound in growth to around 3 percent for the rest of the year.

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