Factory orders shocked the market by dropping 0.1% in February, as a 2.4% decline in nondurable orders offset a 1.8% rise in durables (revised up from the 1.5% reported last week). The market had expected a 1% rise in factory orders. Excluding defense, orders were down 1.2%, following a 1.2% rise in January.
The nondurable decline was in tobacco, chemicals, petroleum, and paper. The report also showed unfilled orders rose for only the second time in 14 months. Shipments were down 2.8%, following a 1.4% January rise. Inventories fell another 0.4% in February, the 13th consecutive drop.
The data cast doubt on the strength of the manufacturing recovery, especially outside of defense. However, the purchasing managers' report (ISM) that was released Monday shows it coming out in March. This latest report provides more reason for the Fed to wait to raise rates, says S&P.