US Factory Orders Fall, Igniting More Worries

New US factory orders fell in April, according to the latest data from the US Commerce Department, with demand for computers and electronic products dropping almost one percentage point on a seasonally adjusted basis from the previous month.

A close look at the numbers indicate total year-over-year comparisons remain positive for all manufacturing sectors, including the computers and electronic products segment, which has so far risen 5.1 percent this year, to $87.7 billion from $83.4 billion in the comparable period of 2011. For the entire US manufacturing sector, total new orders so far for the year have risen to $1.9 trillion from $1.8 trillion, up 6.6 percent. The first and second quarter of each year have traditionally been weaker than the second half of the year and a robust performance later could help wipe out some of the current deficit.

The current trend is downward, though, and this is troubling for the entire economy. With crude oil prices falling sharply over just the last month, there are worries the longer-term trend could be similarly weak. In April, total new orders for all "manufacturing industries," were $465.98 billion, down 0.6 percent, from $468.92 billion in March and a further decline from $478.9 billion in February. The value of manufacturers' new orders had been positive at the beginning of the year, rising 1.5 percent in February from March but this has turned down since and could continue to decline through the slow summer months.

Although many industry segments fell in April, the biggest decline occurred in defense spending, an area of interest to electronics manufacturers. Defense communications equipment fell more than 13 percent sequentially, for example, to $329 million from $378 million, although orders for defense search and navigation equipment strengthened to $3.1 billion, up 4.2 percent, from $2.9 billion in March. New orders for electronic components fell to $3.5 billion from $3.6 billion, down 1.5 percent.

Economists and industry leaders will be watching numbers for May and June closely to see if the economy is able to regain some strength ahead of the third quarter. If new orders remain weak, it could further dampen consumer confidence, especially if the US government itself continues to hold back on defense-related spending and other government procurement.