New orders for U.S.-made goods fell more than expected in April as a global semiconductor shortage weighed on the production of motor vehicles and electrical equipment, appliances and components.
The Commerce Department said on Friday that factory orders dropped 0.6% in April after increasing 1.4% in March. Economists polled by Reuters had forecast factory orders slipping 0.2%. Orders surged 14.2% on a year-on-year basis.
Manufacturing, which accounts for 11.9% of the U.S. economy, is being supported by a shift in demand towards goods from services during the pandemic. But the strong demand is straining supply chains. The Institute for Supply Management reported this week that manufacturing activity picked up in May, but noted that companies were struggling to fill orders because of shortages of raw materials and labor.
Factory goods orders in April were weighed down by a 6.1% decrease in orders for motor vehicles and parts. Orders for electrical equipment, appliances and components fell 0.7%.
Unfilled orders at factories gained 0.2% after rising 0.5% in March. The Commerce Department also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, surged 2.2% in April instead of 2.3% as reported last month.
Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, increased 0.9%, unrevised from last month’s estimate.
Business investment on equipment has enjoyed double-digit growth over the last three quarters, also driven by massive fiscal stimulus to soften the blow to the economy from the public health crisis.