U.S. Factory Orders Increase

Article excerpt

WASHINGTON (AP) -- Orders to U.S. factories registered their first increase of the year in March, thanks to stronger demand for transportation equipment. But the Federal Reserve's latest snapshot of economic conditions showed weakness throughout the economy in March and early April.

The Fed's survey, based on information from its 12 regional banks and collected before April 23, said that "almost all districts report a slow pace of economic activity."

The survey, released Wednesday, will be used by policy-makers at their next meeting on May 15 to set interest rates. Economists believe the central bank at that time will cut rates for a fifth time this year at that time.

The survey said that retail sales were weak in March and while they strengthened in April, most Fed districts expected "only small gains at best" in the coming months.

Consumer spending accounts for two-thirds of all economic activity and has been a main force propping up the struggling economy.

Manufacturers, which have been bearing the brunt of the slowdown, have seen activity continue to weaken, the Fed said.

"The high-tech and telecommunications industries are experiencing a pronounced slowdown," the survey said.

Despite sharply higher energy costs, retail prices were steady in most Fed districts, except for the Richmond, Va., region, where they have been rising at a quicker pace in recent weeks, the survey said.

In the other report, the Commerce Department said factory orders increased by a bigger-than-expected 1.8 percent to a seasonally adjusted $370.5 billion. Many analysts were predicting a 1.5 percent rise.

The advance followed a 0.1 percent drop in factory orders in February, according to revised figures, a better showing than the 0.4 percent decline previously reported. Factory orders fell by 4.3 percent in January.

The economic slowdown has hit the manufacturing sector hardest, causing companies to cut production, trim jobs and reduce work hours to cope with flagging demand.

Seeking to ward off recession, the Federal Reserve has slashed interest rates four times this year, totaling 2 percentage points. …