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FACTORY ORDERS BLAST PAST EXPECTATIONS, WITH WAR MACHINERY, AI SPENDING IN THE DRIVER'S SEAT

Data-hungry investors had to make do with a lone economic report on Monday in the form of the Commerce Department's factory orders report.

New orders for U.S. factory-made merchandise USFORD=ECI rose by 1.5% in March, triple the rate analysts expected and accelerating from February's upwardly revised 0.3% gain.

Once again, the fault is in the planes.

Digging below the headline, a 21.1% drop in orders for commercial aircraft was mitigated by an 18.1% jump in defense-related capital goods. Excluding defense, new orders would have risen by a less robust 0.9%.

The gain was boosted by a 1.3% increase in autos/parts and a 3.6% rise in computers/electronics - the latter offering evidence that AI expenditures are alive and well.

As shown in the graphic below, new factory orders appear to be pulling free from the $600 billion zone, where they have languished since mid-2022.

"The New Orders Index expanded for the fourth straight month after four straight readings in contraction," said Susan Spence, chair of ISM's Manufacturing Business Survey Committee, on Friday. "Manufacturing activity remained in expansion territory, growing at the same pace as the month before."

On another positive note, new orders for core capital goods - which exclude aircraft and defense items and are considered a barometer of U.S. corporate capex plans - were revised higher to 3.4% from the previously stated 3.3% gain, the metric's largest monthly increase since June 2020.

(Stephen Culp)

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