Slowdown points to gloom for industrials US manufacturers may struggle to maintain earnings momentum in the current quarter as orders for industrial goods show increasing signs of slowing down. Industrial companies" results for the first quarter have for the most part been robust so far this earnings season, with Boeing, Caterpillar and 3M all raising their outlooks for the full year and companies such as General Electric, Honeywell and DuPont comfortably beating analysts" expectations. While the results have been hailed as proof of how manufacturing continues to lead the US out of recovery, recent data suggest manufacturers will struggle to match those earnings in the second quarter. US business investment shrank at an annualised rate of 2.1 per cent in the first quarter, down from growth of 5.4 per cent in the fourth quarter of 2011, the Commerce Department said on Friday. That followed a Commerce Department report that showed orders for US durable goods fell 4.2 per cent in March, the largest drop in three years, while the Federal Reserve said production at US factories dropped in March for the first time in four months. First-quarter corporate earnings masked this weakness by reflecting strong performance in the first two months of the year. "I don't think anyone doubts the strength of the economy at the turn of the year when earnings were generated," said Andrew Wilkinson, chief economic strategist at Miller Tabak in New York. What the forward-looking surveys are showing is that we definitely should not extrapolate firmer activity. The drop-off in orders in durable goods [at the same time as] rising shipments [in the first quarter] would seem to corroborate that observation. Reports by several regional Federal Reserve banks - including New York, Kansas City and Philadelphia - warn of a slowdown in April. One cause for concern is the continuing slowdown in China, cited by many big industrial companies as a drag on growth for the rest of the year. Caterpillar said last week that an unexpected slowdown in Chinese demand for construction equipment would force it to export 2,300 excavators to other developing countries this year for the first time since 2005. "Quarterly annualised first-quarter growth for manufacturing output was a very strong 10.4 per cent," said Paul Ashworth, chief US economist at Capital Economics in Toronto. So Q2 may be disappointing. As well as being flattered by low expectations, first-quarter earnings reflected an unusually mild winter. The unseasonably warm winter weather "may have accelerated some shipments," said Diane Swonk, chief economist at Mesirow Financial. We are getting some payback for that now, which is slowing the economy today. Companies may be cushioned by historically big backlogs in orders, said David Hale, a Chicago-based economist. US manufacturers reporting earnings this week include General Motors, Emerson Electric and Cummins.