NEW YORK (CNN/Money) -
Orders received by U.S. factories jumped in March, the government reported Tuesday, with the third gain in four months coming in well ahead of estimates -- another sign the beleaguered manufacturing sector may be finally regaining its footing.
Factory orders rose 4.3 percent in March, after a revised reading of 1.1 percent gain in February, the Commerce Department reported. Economists expected a reading of 2.4 percent, according to Briefing.com.
"The trend in orders is actually accelerating," said Conrad DeQuadros, senior economist with Bear Stearns. "It shows manufacturing in on firm footing in terms of inventories and eventually hiring."
Total orders of manufactured goods rose $14.9 billion in March to $360.7 billion, and new orders excluding defense rose 4.6 percent to $349.9 billion, up from $334.5 billion in February.
Following the report, stocks moved higher and bond prices moved little. However, stocks turned lower in later trading.
The reading on the manufacturing sector adds to a slew of strong economic reports from the retail, employment, and purchasing sectors. All the reports have contributed to the notion that the Federal Reserve will have to raise interest rates to stave off inflation as the economy continues to recover.
The Fed was meeting Tuesday and was slated to release its decision on rates around 2:15 p.m. ET. Most economists believe the central bank will leave rates at the 46-year low of 1 percent, but change its accompanying language on the health of the economy.
"The release of the factory orders probably won't change the Fed's decision," said Anthony Crescenzi, chief bond market strategist with Miller, Tabak & Co. "The report reinforces that the manufacturing sector is recovering."
Crescenzi added that the Fed will look at some of the nuances of the report, such as the inventory-to-shipment ratio, which measures demand.
That measure fell to 1.23 in March from 1.27 in February as shipments rose 3.8 percent, or $13.1 billion, to $361.3 billion, the largest increase since the department began tracking the figure in 1992.
Orders for durable goods, meant to last three years or more, notched its sixth gain in the past seven months, up 5 percent to $195.8 billion, led by a 4.1 percent gain in transportation orders.
The strong gains across the manufacturing sector led to only a slight 0.3 percent rise in inventories as continuing demand kept stockpiles in check.
The relatively low levels of inventories will eventually lead to a hiring pickup in some areas of the manufacturing sector, the hardest hit during last recession, according to Bear Stearns' DeQuadros.
"The manufacturing job cycle is tied pretty closely to the inventory cycle," he said. "We think the April jobs report will show the first rise in manufacturing in 40 months."
Indeed, the April figures from the Institute of Supply Management released Monday also pointed to an increase inmanufacturing hiring, as its employment index increased to 57.8 from 57.0.
That marked the strongest employment reading for that part of the index since December of 1987. It marks the sixth straight month of positive employment outlook, following 37 straight months that saw a contraction of employment.
|