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Factory orders fall 1.2%
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June 3, 1999: 12:34 p.m. ET
April decline, led by transportation equipment, exceeds analysts' forecast
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NEW YORK (CNNfn) - Orders at U.S. factories declined more steeply than expected in April, mainly reflecting a slump in demand for transportation-related goods, the Commerce Department reported Thursday.
Orders received by the nation's factories fell 1.2 percent to a seasonally adjusted $345.4 billion in April, steeper than the 0.9 percent consensus of analysts surveyed by Reuters.
But excluding a 12.3 percent drop in transportation orders, new orders rose 0.5 percent on the month -- suggesting the U.S. economy and demand for U.S.-made goods isn't waning and that an interest rate rise may be in order to cool the economy down.
"There wasn't all that much of a surprise there," said Michael Gregory, a senior economist with Lehman Brothers in New York. "Clearly the risk is still there for the Federal Reserve to raise interest rates."
Transportation-led decline
Orders for transportation equipment slumped as companies submitted fewer orders for aircraft, missiles, ships and tanks, accounting for most of the month's declines.
Excluding transportation, total orders rose for the third consecutive month in April on strong demand for primary metals, electronics and industrial machinery, the report said.
Earlier this week, the National Association of Purchasing Management reported that its monthly index of manufacturing output surged to 55.2 in May, sparking concern that the U.S. economy is growing at a quick enough pace to spark an increase in short-term lending rates.
Now all eyes are turning to Friday's non-farm payrolls report, one of the most significant numbers for financial markets and potentially most volatile.
'A critical number'
"That's certainly going to be the critical number," Gregory said. "A number indicating employment growth, particularly increases in wages, could prompt the Fed to move by the end of this month."
Analysts surveyed by Reuters are forecasting 216,000 new job were added to the economy in May, down from 234,000 in April, with the jobless rate remaining at 4.3 percent.
Fed officials next meet on June 29-30 to discuss U.S. monetary policy and determine whether to raise lending rates to cool off economy and keep inflation at bay.
Total inventories fell 0.1 percent in April, while new orders for manufactured durable goods declined 2.1 percent. Shipments of finished goods declined 0.5 percent on the month. 
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Department of Commerce
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