Factory Orders Decline 1.6 Percent

Orders to U.S. factories declined in March for the first time in seven months, offering reassurances that economic growth soon will moderate to a pace unlikely to aggravate inflation.

The 1.6 percent drop to a seasonally adjusted $319.2 billion ended an otherwise strong first quarter. Orders, a reliable barometer of future production levels, rose 0.4 percent in February after jumping 2.5 percent in January.

Economists said Tuesday’s Commerce Department report fit with their expectation for slower, but still healthy, growth in the overall economy in the April-June quarter after a torrid growth at 5.6 percent in the first quarter.

“It’s not necessarily bad that it’s slowing down. You can’t have too many quarters like the first quarter before you’re in serious trouble,” said economist Joel Prakken of Macroeconomic Advisers in St. Louis.

The more moderate pace of new orders should help prevent inflationary bottlenecks that develop when factories have more orders than they can handle.

In a sign the pressure is easing, the backlog of unfilled orders fell 0.4 percent, the first decline since August, even though shipments of manufactured goods edged down 0.1 percent.

In an attempt to forestall an acceleration of inflation, the Federal Reserve nudged interest rates a quarter-point higher March 25. As recently as a few weeks ago, nearly all economists expected Fed policy-makers to decide on another quarter-point tightening when they next meet on May 20. Now they’re not so sure.

March’s reduction in factory orders was broad-based and included a 2.6 percent drop in orders for durable goods, expensive items intended to last three or more years, and 0.3 percent for nondurable goods.