WASHINGTON—The U.S. economic slowdown widely forecast for the first quarter may be arriving in the second, driven by faltering industrial activity.
Orders for so-called durable goods—manufactured products designed to last at least three years, such as cars, appliances and commercial aircraft— tumbled 2.1% from the prior month to a seasonally adjusted $248.4 billion in April, the Commerce Department said Friday. The government also said such orders grew less than previously estimated in March, painting a weaker picture of U.S. factory demand than anticipated.
Much of the decline owed to the volatile civilian-aircraft component, which dropped 25% from March following a decision by global aviation authorities to ground Boeing Co.'s 737 MAX airliner after a pair of fatal crashes. The company didn't log any commercial orders for 737 planes in March or April, the first months without a sale of its best-selling aircraft in seven years. Boeing in April cut production of the MAX by a fifth, likely putting it behind Airbus SE this year as the world's biggest plane maker.
But the aircraft sales were just one piece of a broader picture. The new data follow others showing recent declines in factory output and business activity broadly, suggesting the economy is losing momentum after expanding at a robust 3.2% annual rate clocked in the first quarter. Research firm Macroeconomic Advisers lowered its estimate of second- quarter growth to a 1.7% pace from 1.9% in the wake of Friday's report.
Though manufacturing accounts for a small share of gross domestic product, the sector is highly sensitive to shifts in demand, making it a bellwether for the broader U.S. economy. Though the U.S. job market remained strong in April—with unemployment falling to a five-decade low of 3.6%—spending at U.S. retailers fell, showing some consumer hesitation as the second quarter began.
Many forecasters had projected economic growth to slow from last year's pace, which was spurred by a strong labor market, tax cuts and federal spending increases. They expected some of those effects to wane, while the lagged impact of the Fed's four interest rate increases last year ripple through the economy. The U.S. trade fight with China is also clouding the economic outlook.
“We've been expecting the economy to slow over the course of this year for some time, mainly because of domestic factors,” says Andrew Hunter, senior U.S. economist at Capital Economics. “But I think the downside risks have really increased over the past few weeks with the escalation of trade tensions.”
Boeing isn't the only big manufacturer seeing softer sales. Harley-Davidson Inc. said that U.S. retail sales of its motorcycles fell 4% in the first quarter, extending a long decline in its biggest market. And tractor maker Deere & Co. said it would cut production by 20% this year.
BY PAUL KIERNAN AND PATRICK MCGROARTY