Factory orders in surprisingly strong jump
Government says orders for manufactured goods spike 1.4%, exceeding analyst expectations.
| Factory orders in March jumped up 1.4%, far exceeding analyst expectations. |
NEW YORK (CNNMoney.com) -- Factory orders spiked in March, after a two-month slide, far surpassing forecasts, according to a government report released Friday.
The Commerce Department reported that orders increased by 1.4% in March to $432.3 billion. Analysts were looking for a more modest 0.2% increase.
Factory orders dropped by a revised 0.9% in February, after plummeting 2.3% in January. The factory orders reading is considered a key indicator of the health of the economy.
Machinery factory orders led the March advance, rising 6.4%.
The nondurable good order increase was partly fueled by the increase in gas prices, said Tim Quinlan, Economic Analyst at Wachovia, in a report.
"With petroleum refineries up 9.2%, we are definitely seeing the price increase of crude contributing to the increase, which maybe takes the shine off the apple a little bit," Quinlan said.
Domestic demand for factory manufactured goods declined in previous months as the economy softened and prices increased. However, record levels of exports have been supporing factory orders.
Weak dollar, strong exports
The weakening of the dollar has made American-made goods more attractive, and cheaper, in other countries.
Output from factories is one of the several key factors in determining whether the country is in a recession.
This report comes as a surprise because the preliminary durable goods report for March released a week ago showed that new orders decreased 0.3%. That number was revised Friday to say that durable goods increased in March by 0.1%. Durable goods orders were down 0.6% in February.
Unfilled orders may lead to more jobs
According to the report, unfilled orders for manufactured durable goods in March have been up 34 of the last 35 months. In March, unfilled orders increased 1.1% to $832.3 billion.
A backlog of unfilled orders may be good news for the job market in the coming months, Quinlan says.
Unfilled orders for nondefense capital goods, excluding aircraft, was up 0.2% in March. While this number seems small, when the tremendous positive effect of defense aircraft orders is excluded, this 0.2% growth rate is a gage of where real demand is, according to Quinlan.
This unfilled order number suggests that factories have plenty of work to keep their businesses doing well. "If they pick up a little bit from here, factories start hiring again," said Quinlan. 
