Factory Orders Make Smaller Gains than Expected in April

New orders for U.S. factory goods rose in April, but not enough to reverse the prior month's plunge, adding to signs of a slowdown in manufacturing activity.

The Commerce Department on Wednesday said new orders for manufactured goods increased 1%. March's orders were revised to show a 4.7 % decline instead of the previously reported 4.9% tumble.

Economists polled by Reuters had forecast orders received by factories rising 1.5%.

Manufacturing has been hit by a combination of deep government spending cuts and slowing global demand, especially in China and the recession-hit Europe.

Data on Monday showed a gauge of national factory activity contracted in May for the first time in six months, dragged down by declining orders.

This suggests the weakness in factory activity, also highlighted by a drop in industrial production in April, will probably persist for some time.

The Commerce Department report showed factory orders were lifted by an 8.4% jump in transportation equipment on the back of strong orders for automobiles, and civilian and defense aircraft.

Orders excluding the volatile transportation category slipped 0.1% after falling 2.8% in March.

Outside transportation there were gains in orders for machinery, computer and electronic products, primary metals and electrical equipment, appliances and components.

Unfilled orders for manufactured goods rose 0.3% and were up 0.8% excluding aircraft, a positive sign for factories. Shipments fell for second straight month.

Stocks of unsold factory goods edged up 0.2%, showing no sign inventories are piling up, which should help the sector in the long-run. Factory inventories account for more than a third of business inventories.

The inventories-to-shipments ratio was 1.31, the highest since June 2012, and up from 1.30 in March. The unfilled orders-to-shipments ratio increased to 6.26 from 6.21.

The Commerce Department also said orders for durable goods, manufactured products expected to last three years or more, rose 3.5% instead of the 3.3% increase reported last week.

Durable goods orders excluding transportation were up 1.5% rather than 1.3%.

Orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - increased 1.25 as previously reported.