The numbers: Factory orders in the U.S. fell in February for the fourth time in five months, reflecting a slowdown in the economy that began late in 2018 and carried on through the early part of the new year
Orders dropped 0.5% in the month, the government said Monday. Economists polled by MarketWatch had forecast a 0.4% decline.
There are some signs that business might be re-accelerating as spring gets underway, but more evidence is needed.
What happened: Orders for durable goods — products meant to last at least three years — fell by an unrevised 1.6% in February. These products include autos, airplanes, appliances, computers and the like.
Orders for nondurable goods such as clothes, paper and processed foods rose 0.6%. They account for about half of all factory orders.
A closely followed gauge of business investment — known as core orders for durable goods — fell slightly. They’ve fallen three of the past four months.
Orders for manufactured goods were revised to show no increase in January instead of a 0.1% gain.
Big picture: Manufacturers are still expanding, but they’ve turned more cautious since last summer. U.S. trade tensions with China, a weaker global economy and stronger dollar have combined to dampen demand and force businesses to reevaluate their plans.
The manufacturing segment is still influential enough to act as a drag on growth, but the service side of the economy is much larger and it’s expanding a bit faster. The U.S. is still on track to set a record for longest economic expansion ever by early summer.
What they are saying? “Investment spending has been a clear victim of the uncertainty generated by the trade war since mid-2018, and that continued through the end of 2018,” said Thomas Simons, senior money market economist at Jefferies LLC. “2019 is getting off to a better start, but there is still so much uncertainty surrounding the trade war that there are certainly downside risks ahead.”
Market reaction: The Dow Jones Industrial Average DJIA, -0.47% and S&P 500 SPX, -0.18% fell in Monday trades, jeopardizing a five-day winning streak.
The 10-year Treasury yield TMUBMUSD10Y, +0.04% rose a tick to 2.5%. Yet yields are still much lower compared to late last year, when they hit a seven-year high of 3.23%.