The latest factory orders report has sent a clear signal, the U.S. manufacturing sector is slowing down. After four consecutive months of growth, new orders for manufactured goods fell 3.7 percent in April, marking the sharpest decline in nearly a year.
The numbers tell the story. Durable goods orders dropped 6.3 percent, driven by a 17.1 percent collapse in transportation equipment demand. The aerospace industry took a particularly hard hit, with non-defense aircraft and parts orders plummeting 51.5 percent. Airlines, facing uncertainty over tariffs, scaled back purchases of Boeing aircraft, which received only eight new orders.
This downturn is more than just a monthly fluctuation. Primary metals orders slipped 0.1 percent, with aluminum and other nonferrous metals seeing a 2.3 percent decline. Electrical equipment, appliances, and components orders also fell 0.3 percent, reflecting weaker demand across multiple sectors.
Shipments, which had been rising for five consecutive months, inched up just 0.3 percent, barely keeping pace with inflation. Unfilled orders remained flat, after rising 1.6 percent in March, suggesting factories are seeing fewer backlogs.
Inventories continue to climb, increasing 0.2 percent in April, pushing the inventories-to-shipments ratio to 1.58, up from 1.57 in March. This signals potential overproduction, which could lead to further slowdowns in manufacturing output.
The broader economic implications are serious. A decline in factory orders often precedes broader economic contractions, as manufacturers adjust production in response to weaker demand. With transportation and aerospace sectors leading the downturn, ripple effects could spread across supply chains.
The Federal Reserve’s next move will be critical. If rate cuts materialize, borrowing costs could ease, potentially stabilizing demand for manufactured goods. However, if inflation remains stubborn, businesses may continue to pull back on new orders, deepening the slowdown.
Sources:
https://www.investing.com/economic-calendar/factory-orders-100