Core capital goods are a good proxy for business investment plans. The declines suggest companies are worried about a weaker job market, which could crimp consumer spending. Businesses may also fear the worsening European debt crisis and slower growth in China will slow demand for American exports.

Image Credit... The New York Times

Even with the declines, factory orders are well above their recession lows. Orders in April totaled $465.98 billion, up 38.7 percent from the recession low reached in March 2009. Orders are still 3.1 percent below the peak reached in December 2007, the month the recession began.

Economists said they expected the recent decline in factory orders to be reversed in the coming months. They predicted manufacturing would remain a source of strength for the economy this year.

John Ryding and Conrad DeQuardros of RDQ Economics noted that the Institute for Supply Management’s survey of manufacturing activity showed new orders rose to a 13-month high in May.

“We think U.S. manufacturing remains in good shape and that it will continue to expand at a solid rate in the coming months,” they wrote in a note to clients.