Ahead of the Bell: US factory orders

US factory orders likely to rise in March but key investment category expected to remain weak

Associated Press
US factory orders rose in February for first time since July

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In this March 13, 2015 photo, robots fasten parts on a new 2015 aluminum-alloy body Ford F-150 truck in the body shop at the company's Kansas City Assembly Plant in Claycomo, Mo. The Commerce Department releases factory orders for February on Thursday, April 2, 2015. (AP Photo/Charlie Riedel)

WASHINGTON (AP) -- The Commerce Department reports on U.S. factory orders for March at 10 a.m. Eastern on Monday.

ORDERS UP: The expectation is that orders rose 2.1 percent in March, according to a survey of economists by data firm FactSet.

FACTORY HEALTH: U.S. factories have been dealing with a soft patch in recent months, reflecting in part a big rise in the value of the dollar, which makes U.S. exports more expensive and less competitive overseas while lowering the cost of imported goods, making them more attractive to U.S. consumers.

An advance report showed demand for durable goods rose 4 percent in March, the strongest gain in eight months, but the strength was led by strong demand for commercial aircraft, a very volatile sector.

More worrisome was the fact that orders in a key category that serves as a proxy for business investment fell 0.5 percent in March, the seventh straight month orders have fallen in this category. The decline showed that businesses kept pruning their investment plans in March in the face of a weakening economy.

The report Monday will revise the initial estimate on durable goods, items expected to last at least three years, and provide a look at demand for nondurable goods such as petroleum products, paper and food.

The government reported last week that the overall economy, as measured by the gross domestic product, expanded by a meager 0.2 percent in the January-March quarter as a harsh winter, a rising trade deficit and weaker business investment all contributed to hold back growth.

Economists believe growth will rebound in the April-June quarter, helped by stronger job growth that is expected to spur consumer spending. Auto sales rose in April, led by strong demand for small and midsize SUVs.

Economists at Macroeconomic Advisors are looking for the GDP, the country's total output of goods and services, to grow at a 1.9 percent rate in the second quarter, a significant rebound from the barely discernible 0.2 percent rate of the first three months but down from the nearly 3 percent growth rate the forecasting firm was expecting before a string of disappointing reports on the economy over the past month.

But other analysts are more optimistic.

"As the weather returns to more seasonal norms, we anticipate a big rebound in consumption growth," said Paul Ashworth, chief U.S. economist at Capital Economics. He is forecasting 3.5 percent GDP growth in the second quarter.

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