US factory orders fall, economy could contract

Yesterday's US data were mixed. Bloomberg reports that factory orders fell more than expected in February.

Orders to U.S. factories fell more than forecast in February, as companies scaled back investment plans on concern the economy was already in a recession.

The 1.3 percent decrease followed a 2.3 percent decline in January, the Commerce Department said today in Washington. Excluding orders for transportation equipment, which tend to be volatile, demand fell 1.8 percent, the largest decline since January 2007...

Orders for durable goods, which comprise about half of factory orders, fell 1.1 percent in February, led by the biggest slump in demand for machinery in four years, Commerce said.

Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, fell 2.4 percent...

But employment appears to be holding up better than expected.

Separately, a private survey from ADP Employer Services today showed companies unexpectedly added workers in March. The increase of 8,000 jobs followed a revised drop of 18,000 the prior month that was less than previously estimated, according to the report from ADP Employer Services.

Nevertheless, US economic growth is likely to be weak.

Federal Reserve Chairman Ben S. Bernanke, testifying before Congress today, acknowledged for the first time that the economy may contract as homebuilding weakens further, unemployment rises and consumer spending slumps. "It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly," Bernanke said in testimony to the Joint Economic Committee.