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Tag: factory

  • Durable-goods orders fall 1% in February. Cars and planes to blame

    Durable-goods orders fall 1% in February. Cars and planes to blame

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    The numbers: Orders for U.S. manufactured goods fell 1% in February because of less demand for passenger planes and new cars. Yet business investment rose for the second month in a row in a sign the industrial side of the economy is still growing.

    Economists polled by the Wall Street Journal had forecast a 0.3% drop in orders. Durable goods are products like cars, appliances and computers meant to last at least three years.

    Orders rise in an expanding economy and shrink in a contracting one. They are still rising but at a slower pace compared to last year.

    Orders are up 2.3% over the past 12 months, marking the smallest year-over-year increase since 2020.

    See government report

    Key details: Orders for commercial jets and new cars both fell last month. Bookings dropped 6.6% for airplanes and almost 1% for new autos.

    The transportation segment is a large and volatile category that often exaggerates the ups and downs in industrial production. Orders for both the aircraft and carmakers have been very choppy since the pandemic.

    Orders excluding transportation were unchanged in February, reflecting recent weakness in manufacturing.

    The most positive news in the report was the second straight increase in business investment — a sign of future demand. So-called core orders rose 0.2%.

    These orders exclude military spending and the auto and aerospace industries. They are up 4.3% in the past year, but that’s also the smallest increase since 2020.

    Big picture: The industrial side of the economy has slowed since last year because of steep inflation and rising interest rates. Higher borrowing costs curtail demand for expensive manufactured goods and discourage investment.

    Manufacturers are still growing, but further weakness would be a bad omen. Heavy industry is at the leading edge of the economy.

    The recent turmoil in the banking sector after the failure of Silicon Valley Bank could also add to the stress if banks scale back lending to businesses.

    Looking ahead: “Business investment is definitely a vulnerability for the economy in the event of a severe tightening in credit conditions,” said chief economist Stephen Stanley of Santander Capital Markets. “Thus, it will be important to watch these numbers going forward.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.41%
    and S&P 500
    SPX,
    +0.56%
    were set to open sharply lower in Friday trades.

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  • U.S. industrial output was flat in February

    U.S. industrial output was flat in February

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    The numbers: U.S. industrial production was flat in February, the Federal Reserve reported Friday.

    The unchanged reading was in line with economists expectations, according to a survey by The Wall Street Journal.

    Output rose a revised 0.3% in January, revised up from the initial estimate of a flat reading, but there were deep declines in November and December.

    Key details: Manufacturing output downshifted to a slim 0.1% rise in February after a strong 1% gain in the prior month. 

    Motor vehicles and parts output fell 0.3% after a 0.6% jump in January. Excluding autos, total industrial output was unchanged.

    Utilities output rose 0.5% in February. Mining output, which includes oil and natural gas, fell 0.6% after a 2% gain in the prior month.

    Big picture: The softness in manufacturing is expected to continue as interest rates have moved higher. Credit conditions are expected to tighten in the wake of the worries surrounding regional banks.

    Market reaction: Stocks
    DJIA,
    -0.95%

    SPX,
    -0.63%
    were set to open lower on Friday. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.449%
    fell to 3.47%.

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  • Philadelphia Fed’s manufacturing gauge remains deep in contraction territory in March

    Philadelphia Fed’s manufacturing gauge remains deep in contraction territory in March

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    The numbers: The Philadelphia Fed said Thursday its gauge of regional business activity inched up to negative 23.2 in March from negative 24.3 in the prior month. Any reading below zero indicates improving conditions. This is the seventh straight negative reading and the ninth in the last ten months.

    Key details: Broad indicators in the data were all negative in March. The barometer on new orders sank to negative 28.2 in March from negative 13.6 in the prior month. The shipments index sank to negative 25.4 from 8. The measure…

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  • New York Empire State factory gauge drops sharply in January signaling deep contraction in activity

    New York Empire State factory gauge drops sharply in January signaling deep contraction in activity

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    The numbers: The New York Fed’s Empire State business conditions index, a gauge of manufacturing activity in the state, tumbled 21.7 points to negative 32.9 in January, the regional Fed bank said Tuesday. 

    This is the lowest level since the worst of the pandemic in May 2020 and among the lowest levels in the survey’s history, the regional Fed bank said.

    Economists had expected a reading of negative 7, according to a survey by The Wall Street Journal.

    Any reading below zero indicates contraction.

    Key details: The new orders index fell 27.5 points to negative 31.1 in January. Shipments fell 27.7 points to negative 22.4.

    The indexes for prices paid and prices received moved lower.

    The employment gauges were also weak.

    Firms expect little improvement in coming months, with the futures index at 8.

    Big picture: The Federal Reserve’s steady increase in interest rates is having a slowing impact on capital spending as firms are scaling back investment, economists said. Demand for goods is also slowing after two strong years on the weak global economy. Added to the mix is the strong dollar which makes U.S. exports more expensive.

    The market pays attention to the Empire State index because it is seen as a early read on the national ISM manufacturing index to be released early next month.

    The ISM factory index contracted in December for the second straight month, falling to 48.4% from 49% in the prior month.

    Looking ahead: “Manufacturing conditions in the U.S. are deteriorating and the worst is likely ahead,” said Gurleen Chadha, economist at Oxford Economics.

    Market reaction: U.S. stocks
    DJIA,
    -1.14%

    SPX,
    -0.20%
    opened lower on Tuesday. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    3.489%
    retreated to 3.51% after reaching 3.57% in early morning trading.

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  • U.S. durable-goods orders drop 2.1% in another sign of slowing economy

    U.S. durable-goods orders drop 2.1% in another sign of slowing economy

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    The numbers: Orders for manufactured goods sank 2.1% in November in another sign of slackening demand in the U.S. economy as the year winds down.

    Fewer contracts for commercial jets explained most of the weakness last month. But orders minus transportation and a key measure of business investment posted just very small increases.

    Orders rise in an expanding economy and shrink when growth weakens. A variety of measures point to waning demand for goods due to a more fragile economy and a shift in consumer spending toward services such as travel and recreation.

    Economists polled by the Wall Street Journal had forecast a 1.1% decline in orders for durable goods — or products meant to last at least three years.

    Key details: Orders for aircraft nosedived 36% last month, reflecting typical seasonal swings in contract signings. Demand for new cars and trucks also fell slightly.

    The transportation segment is a large and volatile category that often exaggerates the ups and downs in industrial production.

    Outside of transportation, new orders rose a meager 0.2%. Bookings increased in every major category except primary metals.

    Business investment, meanwhile, also rose 0.2% last month, but the annual rate of growth has slowed sharply in recent months to 5.7% from more than last spring.

    These orders exclude military spending and the auto and aerospace industries.

    Big picture: American manufacturers are likely to tread water for a while.

    Higher interest rates have sapped demand for houses, new cars and other big-ticket items because of the added costs and a fading global economy has curbed exports.

    The Federal Reserve plans to keep raising interest rates to tame high inflation, so the slowdown in manufacturing could intensify.

    The one side-benefit? Congested supply chains are clearing up and reducing a primary driver of inflation over the past few years.

    Looking ahead: “Underlying investment demand is weakening,” said senior U.S. economist Andrew Hunter in a note to clients. “We expect it to weaken more markedly next year as the full impact of the Fed’s aggressive tightening this year feeds through.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.53%
    and S&P 500
    SPX,
    +0.59%
    were set to open higher in Friday trades.

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  • The U.S. economy is losing speed, S&P surveys show

    The U.S. economy is losing speed, S&P surveys show

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    The numbers: Business conditions at U.S. companies deteriorated again in November and pointed to a slowing economy.

    The “flash” U.S. services sector index drop to a three-month low of 46.1 this month from 47.8 in October, keeping it near the lowest level of the pandemic era. The service side of the economy employs most Americans.

    The S&P Global U.S. manufacturing sector index, meanwhile, slid to a 2 1/2-year low of 47.6 from 50.4.

    Any number below 50 reflects a contracting economy.

    Key details: New orders, a sign of future sales, fell in November at the fastest pace since early in the pandemic in 2020, S&P Global found. Exports also declined.

    The cost of supplies, a measure of inflation, eased again in a sign that intense inflationary pressures are on the wane. Companies also raised prices at the slowest rate in more than two years.

    Shortages of supplies, a big problem during the pandemic, also continued to diminish.

    These shortages were one of the biggest contributors to the U.S. and global surge in inflation. While they are fading, they remain a big problem.

    Big picture: Businesses are still expanding by some measures, but they are also preparing for slower economic growth.

    Rising interest rates orchestrated by the Federal Reserve have dampened sales in the U.S. while a strong dollar has hurt exports by making American products more expensive.

    Looking ahead: “Inflationary pressures should continue to cool in the months ahead, potentially markedly, but the economy meanwhile continues to head deeper into a likely recession,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.28%
    and S&P 500
    SPX,
    +0.59%
    rose in Wednesday trades.

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  • Durable-goods orders jump 1%, but momentum unlikely to last as U.S. economy slows

    Durable-goods orders jump 1%, but momentum unlikely to last as U.S. economy slows

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    The numbers: Orders at American factories for long-lasting goods such as autos and computers jumped 1% in October, marking a strong showing that probably isn’t sustainable because of a slowing U.S. economy.

    Economists polled by the Wall Street Journal had forecast a 0.5% increase. Durable goods are items such as autos, appliances and computers meant to last at least three years.

    A key measure of business spending, meanwhile, also rose a solid 0.7% last month.

    Orders tend to rise steadily in an expanding economy and shrink when it weakens. Yet the results in October don’t look quite as strong after inflation is taken into account. The consumer price index rose 0.4% last month.

    Big picture: Manufacturers are able to produce more of what their customers want after two years of chronic shortages, but mostly because demand has softened. Rising U.S. interest rates have curbed sales at home while a strong dollar has dented exports.

    The situation could get worse. The Federal Reserve is jacking up interest rates to bring down high inflation, but higher borrowing costs are expected to slow the economy even further.

    Key details: Orders for new cars climbed 0.6% in October. Orders for aircraft rose a sharper 7.4%. The transportation segment is a large and volatile category that often exaggerates the swings in industrial production.

    Outside of transportation, new orders rose a still-decent 0.5%. Bookings increased in every major category except for primary metals.

    The rate of growth in business investment, or core orders, has slowed considerably. however. The figure excludes military spending and the auto and aerospace industries.

    Looking ahead: “Business equipment investment continues to hold up reasonably well in the face of higher borrowing costs,” said senior U.S. economist Andrew Hunter of Capital Economics, but “we doubt that resilience will continue indefinitely.”

    Market reaction: The Dow Jones Industrial Average
    DJIA,
    +0.50%
    and S&P 500
    SPX,
    +0.59%
    were set to open slightly higher in Wednesday trades.

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  • German factory orders fall a bigger-than-expected 4% in September

    German factory orders fall a bigger-than-expected 4% in September

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    New orders in Germany’s manufacturing sector fell sharply and by more than forecast in September reflecting weakening external demand for goods in a context of rising input costs and high energy prices.

    Factory orders fell 4.0% on month, data from the German statistics office Destatis showed Friday. The decrease was considerably steeper than forecast by economists polled by The Wall Street Journal, who expected orders to fall by 0.5%.

    The German statistics office revised new orders data for August. Following the revision, orders fell 2.0% on month, instead the 2.4% decline first estimates showed.

    Domestic orders increased by 0.5% while foreign orders were down 7.0% on month. New orders from the eurozone decreased 8.0%, while new orders from other countries fell by 6.3% compared with August, Destatis’ data showed.

    The producers of capital goods recorded a decrease of 6.0% month-on-month and producers of intermediate goods saw a fall in new orders of 3.4%. Regarding consumer goods, orders rose by 7.2% on month, Destatis said.

    Compared with September 2021, new orders fell by 10.8%. The volume of new orders in September 2021 was exceptionally high, Destatis noted.

    Write to Maria Martinez at maria.martinez@wsj.com

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  • U.S. manufacturing barely expands in October, ISM says

    U.S. manufacturing barely expands in October, ISM says

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    The numbers: A closely-watched index that measures U.S. manufacturing activity fell 0.7 percentage points to 50.2 in October, according to the Institute for Supply Management on Tuesday.

    Economists surveyed by the Wall Street Journal had forecast the index to inch down to 50. Any number below 50% reflects a shrinking economy.

    It is the lowest level since May 2020.

    Key details: The index for new orders remained in contraction territory, rising 2.1 points to 47.1. The production index rose 1.7 points to 52.3.

    The employment index rose 1.3 points to 50 in October.

    Supplier deliveries fell 5.6 points to 46.8 in October. This is the first time that deliveries were in a “faster” territory since February 2016.

    The price index dropped 5.1 points to 46.6., also the lowest reading since the pandemic. Pricing power is shifting back to the buyer, the ISM said.

    Only 8 of the 18 manufacturing industries reported growth in October.

    Big picture: Manufacturing has been slowing recently led by softening business spending and fading demand for consumer goods. Economists think it is inevitable the index slips below the 50 threshold.

    In a separate data, the S&P global U.S. manufacturing PMI inched up to 50.4 in its “final” reading in October from the “flash” reading of 49.9. This is down from a reading of 52 in September.

    What ISM said: Manufacturing is slowing down and could soon enter contraction territory, but that doesn’t mean there will be a recession in the U.S., said Timothy Fiore, chair of the ISM factory business survey.

    “I don’t see a collapse of new orders. I don’t see a collapse of the PMI,” Fiore said.

    Looking ahead: “Recession jitters among manufacturers won’t disappear any time soon…manufacturing will endure more pain as demand weakens at home and abroad while prices stay high and interest rates remain fairly elevated,” said Oren Klachkin, economist at Oxford Economics.

    Market reaction: Stocks
    DJIA,
    -0.24%

    SPX,
    -0.41%
    were lower after the economic data. The yield on the 10-year Treasury note
    TMUBMUSD10Y,
    4.053%
    moved back above 4%.

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