U.S. factories received fewer orders in March, according to government data released Friday. Experts had expected a drop, but the slide was sharper than economists had been predicting.
Still, there were some positive signs for the sector. Inventories continued to decline, indicating that companies are working through their excess stockpiles.
Also, a separate report showed that the rate of contraction in the manufacturing sector continued to slow last month.
The U.S. Commerce Department said factory orders slipped 0.9 percent for March, reversing some of the previous month's rebound.
February saw an increase of 0.7 percent, revised from an advance of 1.8 percent that was initially reported. This followed a drop of 3.5 percent in January.
Economists had expected March factory orders to drop 0.4 percent.
The data showed that the decline was fairly evenly spread throughout the manufacturing group, with big-ticket items and more disposable goods both seeing similar declines.
The slide was also balanced among the more noteworthy groups within the sector.
Excluding the defense sector, factory orders were down 0.9 percent, following a slide of 0.1 percent in the previous month. Likewise, orders were down 0.9 percent leaving out the impact of the transportation sector.
Durable goods orders, or orders for items meant to last longer than 3 years, dropped 0.8 percent in March, giving back some of the 1.6 percent increase seen in February. In January, factory goods orders had plunged 7.8 percent.
Orders for more disposable non-durable goods were down 1.0 percent, continuing the slide seen in February, when orders edged down by 0.2 percent.
Inventories dropped 0.8 percent in the month, following February's decline of 1.3 percent and January's retreat of 1.1 percent.
The fall in inventories is an important factor in setting the stage for improvement in the manufacturing sector, but some economists are skeptical about whether there is enough demand out there once stockpiles are refilled.
Another report released Friday showed some improvement in the factory sector, though activity continues to shrink.
The Institute for Supply Management revealed that its index of national manufacturing activity rose to 40.1 in April. This was up from 36.3 in March and above the 38.4 that economists had predicted.
Any reading below 50 indicates contraction in the sector, meaning that April still saw a weakening of manufacturing activity. But April marked the fourth consecutive month of improvement from the recent low set in December, bringing the index above 40 for the first time since September.
The ISM survey is likely to receive more attention than the factory orders number, as it provides a more real-time glimpse at the sector.
Many economists were heartened by the better-than-expected ISM report, but the index is still nearly a full 10 points below the level that would indicate a return to growth.
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