U.S. manufacturing mired in soft patch as orders, shipments fall

WASHINGTON (Reuters) – New orders for U.S.-made goods fell in April and shipments dropped by the most in two years, indicating continuing weakness in manufacturing activity that could hurt the broader economy.

The report from the Commerce Department on Tuesday added to moderate consumer spending as well as weak home sales, construction and equipment outlays in April in suggesting that economic growth was slowing sharply after a temporary boost from trade, inventories and defense spending in the first quarter.

Some economists believe the dimming economic outlook, which also reflects an escalating trade war between the United States and China, could force the Federal Reserve to cut interest rates this year. The U.S. central bank early this year suspended its three-year rate hiking campaign.

Fed Chairman Jerome Powell said on Tuesday the central bank was closely monitoring the implications of the trade tensions on the economy and would “act as appropriate to sustain the expansion.”

“Powell may have opened the door a crack wider to the possibility that the Fed will ratify one or two of the rate cuts the markets have discounted this year,” said Chris Rupkey, chief economist at MUFG in New York.

Factory goods orders declined 0.8%, pulled down by softening demand for transportation equipment, computers and electronic orders, and primary metals. Orders increased 1.3% in March.

Economists polled by Reuters had forecast factory orders would fall 0.9% in April. Factory orders rose 1.6% compared to April 2018. Manufacturing, which accounts for about 12% of the economy, is being squeezed by businesses placing fewer orders while working off stockpiles of unsold goods in warehouses.

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