February Orders for US Factories Increase on Vehicle Demand image

In February orders placed with factories in the US increased considerably, due to a boost in vehicles and commercial aircraft demand.

The bookings increased by 3%, the highest level over the past five months, after a drop of 1% in January, according to a Commerce Department report. This increase was due to a 5.6% surge in demand for durable goods, a little under the 5.7% estimated last week. Auto sales in the US head towards the best year since 2007 and the home construction gains are also leading to an increase in orders and sales.

“Business spending will have another good year,” said Nigel Gault, chief U.S. economist for IHS Global Insight in Lexington, Massachusetts. “There’s demand here in the U.S., and some return of export growth.”

According to the report, last month factories took a breather to analyze the impact of the government’s spending cuts, also known as sequestration, which were imposed at the beginning of March. Last month the Institute for Supply Management’s factory index dropped to 51.3 from a two-year high in February of 54.2. It is worth mentioning that a reading of 50 is right between growth and contraction.

“There is concern that sequestration will weigh on some sectors,” Josh Dennerlein, an economist at Bank of America Corp. in New York, said before the report. Over the longer term, “autos and housing are really kicking in. That feeds into the rest of the economy.”