U.S. factory orders rose 2.1 percent in March, after a few months of declines. Does it indicate that the economy is rebounding after the harsh winter?
March factory orders increased by 2.1 percent over February, being in line with consensus estimates. That gain ends 7 straight monthly declines, as February’s reading, which was initially at plus 0.2 percent, was revised lower to -0.1 percent. Not surprisingly, that report was considered as an indication that growth in manufacturing sector is regaining some momentum after slowing down in the first quarter due to the appreciation of the U.S. dollar, which weakened exports, and lower oil prices, which troubled the energy sector.
However, factory orders were boosted by new orders in civilian aircraft, which are very volatile, and orders for motor vehicles and parts, which increased by 6 percent monthly. But excluding transportation orders, orders were unchanged (the same applies practically to core orders for capital goods). Please also note that on an annual basis, factory orders are down 3.3 percent, following a downwardly revised -6 percent in February and -5.2 percent in January.
Not only U.S. manufactures are experiencing tough times. China’s new factory orders declined in April at the strongest pace in a year, another sign of a global slowdown. HSBC’s manufacturing index based on a survey of factory purchasing managers fell to a 12-month low of 48.9 in April from 49.6 in March, where a number below 50 shows contraction.
Regarding other important news, the U.S. construction spending fell in March by 0.6 percent to a six month low, as both private-sector and government construction declined. While we can still blame the weather for some of the decline, there is apparent weakness among builders.
To sum up, although total factory orders improved slightly in March, orders excluding transportation were unchanged, which means that the manufacturing sector is still a drag on economic growth. Moreover, early indications for the second quarter are all rather soft. Indeed, the GDPNow model forecast for real GDP growth in the second quarter of 2015 is only 0.8 percent, which puts the big recovery into question. As there are questions about the health of the U.S. economy and whether (and when) the Fed will raise rates, gold prices are going to trade sideways because of the uncertainty over the condition of the U.S. economy and the timing of the Fed’s hike.
Thank you.
Arkadiusz Sieron
Sunshine Profits‘ Gold News Monitor and Market Overview Editor
Gold News Monitor
Gold Trading Alerts
Gold Market Overview
