New orders for U.S.-made goods rebounded in March and business spending on equipment was stronger than initially estimated, boosted by robust domestic demand, though momentum could slow because of bottlenecks in the supply chain.
The Commerce Department said on Tuesday that factory orders increased 1.1% in March after falling 0.5% in February.
Economists polled by Reuters had forecast factory orders rebounding 1.3%. Orders rose 6.6% on a year-on-year basis.
The White House's $1.9 trillion pandemic relief package and the expansion of the COVID-19 vaccination program to all adult Americans have led to a boom in demand, which is pushing against supply constraints.
The Institute for Supply Management reported on Monday that manufacturing activity grew at a slower pace in April, restrained by shortages of inputs. Robust consumer spending helped to lift gross domestic product growth at a 6.4% annualized rate in the first quarter, which followed a 4.3% growth pace in the final three months of 2020.
Most economists expect double-digit GDP growth this quarter, which would position the economy to achieve growth of at least 7%, which would be the fastest since 1984. The economy contracted 3.5% in 2020, its worst performance in 74 years.
Factory goods orders in March were boosted by strong demand for machinery, motor vehicles, fabricated and primary metal products. But orders for electrical equipment, appliances and components decreased. Unfilled orders at factories rose 0.4% after surging 0.9% in February.
The Commerce Department also reported that orders for non-defense capital goods, excluding aircraft, which are seen as a measure of business spending plans on equipment, jumped 1.2% in March instead of increasing 0.9% as reported last month.
Shipments of core capital goods, which are used to calculate business equipment spending in the GDP report, rose 1.6%. They were previously reported to have rebounded 1.3% in March. Business spending on equipment recorded a third straight quarter of double-digit growth in the first quarter.