New orders for key US manufactured capital goods fell more than expected in March, while shipments fell, suggesting that business spending on equipment was likely to impact economic growth in the first quarter.
Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, fell 0.4% last month, the Commerce Department reported.
Data for February was revised down to show orders for these core capital goods fell 0.7% instead of the 0.1% drop as previously reported. Economists polled by Reuters forecast orders for core capital goods to fall 0.1%.
The tightening in credit following the recent financial market turmoil could make financing less accessible to households and businesses, putting pressure on investment in equipment and subsequently the manufacturing industry.
The manufacturing sector, which accounts for 11.3% of the U.S. economy, has been reeling from the Federal Reserve's fastest rate hike campaign since the 1980s. Spending is also shifting from goods to services, while sluggish global demand restricts exports. Inventory cycles are also changing, with restocking by businesses slowing to match cooling demand.
Shipments of core capital goods fell 0.4% in March after falling 0.4% in February. Shipments of core capital goods are used to calculate equipment expenditure in the measure of gross domestic product. Business spending on equipment fell the most in 2-1/2 years in the fourth quarter.
Most economists had expected a small decline when the government published preliminary GDP estimates for the first quarter on Thursday. Based on a survey of economists, GDP is likely to increase at an annual rate of 2.0% in the January-March quarter. The economy grew at a rate of 2.6% in the fourth quarter.
