The Commerce Department's report released Wednesday offered more evidence that the nation's battered manufacturing sector, which has been shedding hundreds of thousands of workers and operating below capacity, is bearing the brunt of the economy's problems.
The over-the-month decline in February came after factory orders went up by a solid 1.7 percent in January, a brief bright spot in otherwise lackluster activity.
February's performance was weaker than the 0.7 percent decline that analysts had been forecasting. Manufacturers saw orders drop for metals, machinery, computers and electrical equipment. Orders for automobiles and parts were flat.
The 1.5 percent decline in orders in February was the largest drop since September, when orders fell by 2.4 percent.
On Wall Street, investors shrugged off the report and rallied on the hope that the war is progressing in the United States' favor. The Dow Jones industrial average surged 218 points and the Nasdaq gained 46 in morning trading.
A more-forwarding looking report, released Tuesday, offered a dismal and unsettling picture of the manufacturing sector for March: the industry saw activity shrink for the first time in five months.
The Institute for Supply Management's manufacturing index fell to 46.2 for March, down from February's reading of 50.5. A reading below 50 means manufacturing activity contracted, while a reading above that mark suggests growth.
Manufacturing has been the weakest link in the national economy's ability to get back to full throttle.
Some private economists worry that the malaise in manufacturing could spread to other parts of the economy, throwing it into a new recession. Odds of a so-called double dip recession are growing, economists say, because the job market is expected to lose more ground.
The nation's unemployment rate rose to 5.8 percent in February. Economists believe it could move to 5.9 percent or 6 percent for March, and higher in the months ahead. The government reports on the employment situation for March on Friday.
Economists also believe the economy lost 40,000 jobs in March alone. That wouldn't be good, but it would mark an improvement over February when payrolls were slashed by a whopping 308,000.
A big fear is that a worsening labor market will make consumers a key force keeping the struggling economy going — turn more cautious, slowing the economy even further, economists say.
Uncertainties surrounding the war, higher energy prices, lackluster profits, and a turbulent stock market are among the forces that have made businesses reluctant to invest heavily in capital projects and to embark on a hiring spree. The caution shown by businesses on those fronts are a major force behind the ailing economy.
In Wednesday' report, orders for automobiles were flat in February, after rising 12.5 percent the month before.
Orders for primary metals went down 2.5 percent, erasing part of January's 2.7 percent gain. For machinery, orders fell 2.5 percent in February, compared with a 3.2 percent advance in January.
Orders for computers plunged 16.5 percent in February, on top of a 4.9 percent decline. Electrical lighting equipment orders plummeted 11.1 percent, a reversal from a 14.6 percent gain.
For furniture, orders went down 5.6 percent in February, following a 1.6 percent decline.
Orders for "nondurable" goods, such as food and clothes, fell 1.4 percent in February, after a 1.3 percent gain.