Economic Recovery and Factories and Manufacturers and Manufacturing & Technology

Factory orders sink for first time since June

December 3, 2010

Orders to U.S. factories fell in October by the largest amount in five months, reflecting a big drop in demand for aircraft.

Factory orders declined 0.9 percent in October, the Commerce Department reported Friday. It was the first setback since June and the biggest decline since a 1.8-percent fall in May. The weakness was led by plunging demand for commercial and military aircraft. Excluding the transportation categories, orders were down a smaller 0.2 percent.

Manufacturing has been one of the standout performers in what has been a sub-par economic recovery. Booming export sales have helped to offset weakness in domestic demand.

The October drop in total orders had followed a solid 3-percent rise in September that had been driven by a surge in demand for commercial aircraft, a highly volatile category.

While commercial plane orders more than doubled in September, they fell 4.4 percent in October. In addition, demand for military aircraft dropped 25.1 percent in October.

Orders for autos and auto parts edged up 0.6 percent in October after a 0.8-percent fall in September and an even bigger 4.5-percent drop in August.

Total transportation orders dipped 5.2 percent in October after a 16.5-percent September increase. The 0.2 percent drop in orders excluding transportation followed a 1.3-percent rise in this category in September.

The category of nondefense capital goods excluding aircraft, considered a good proxy for business investment plans, fell 4.3 in October after a 1.8-percent increase in September.

Orders for durable goods, long-lasting products, dropped 3.4 percent, slightly worse than the government's initial estimate last week of a 3.3-percent fall in durable goods orders. Demand for nondurable goods, ranging from food to petroleum and paper products, rose 1.5 percent in October following a 1.4-percent rise in September.

The weakness outside of transportation reflected widespread declines in a number of categories. Orders for primary metals fell 0.6 percent while demand for machinery was down 1.5 percent. Orders for computers and other electronic goods fell 7.9 percent.

The report on the big drop in factory orders came out on the same day that the government reported the unemployment rate in November jumped to a seven-month high of 9.8 percent as businesses added only 39,000 jobs last month.

Employment in manufacturing fell in November by 13,000, the fourth consecutive monthly decline.

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