NEW orders for U.S.-made capital goods fell more than expected in April, further evidence that the economy was slowing after a growth spurt in the first quarter that was driven by exports and a buildup of inventories.

The report from the U.S. Commerce Department on Friday also showed orders for these goods were not as strong as previously thought in March and shipments were weak over the last two months, indicating that manufacturing was fast losing ground.

The sector, which accounts for about 12 percent of the economy, is being squeezed by businesses placing fewer orders while working off stockpiles of unsold goods in warehouses. The inventory overhang is concentrated in the automotive sector, which is experiencing slow sales. Boeing’s move to cut production of its troubled 737 MAX aircraft is also hurting manufacturing.

The loss of momentum came even before a recent escalation in the trade war between the United States and China, leading economists to expect demand for capital goods to remain soft.

Data on Thursday showed a measure of factory activity hit an almost 10-year low in May.

“We can’t sugar-coat today’s news,” said Chris Rupkey, chief economist at MUFG in New York. “Business investment is absolutely critical for the economy to move forward and investment is normally the swing factor that pumps up growth or pulls out the support from the economy.”

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, dropped 0.9 percent last month as demand softened almost across the board. These so-called core capital goods orders rose 0.3 percent in March instead of 1 percent as previously reported.

Economists polled previously had forecast core capital goods orders falling 0.3 percent in April.

Shipments of core capital goods were unchanged last month after a downwardly revised 0.6 percent decline in the prior month. Core capital goods shipments are used to calculate equipment spending in the government’s gross domestic product measurement.

They were previously reported to have slipped 0.1 percent in March. Friday’s report followed data this month showing weak retail sales, industrial production and home sales that prompted economists to slash GDP growth forecasts for the second quarter.

The economy grew at a 3.2 percent annualized rate in the first quarter, but the downward revision to March core capital goods shipments suggests business spending on equipment was even weaker than initially estimated during the quarter. That could result in the January-March GDP growth estimate being trimmed when the government publishes its revision next week. (SD-Agencies)