Tags: Factory Orders

Factory Orders Fall 1% as Businesses Cut Demand for Capital Goods

Monday, 05 Mar 2012 10:22 AM

Businesses sharply reduced orders for machinery and other core capital goods in January after a tax credit expired, pushing U.S. factory orders down by the largest amount in 15 months.

Even with the decrease, orders are near pre-recession levels.

The Commerce Department said Monday that factory orders fell 1 percent in January. Investment in a category considered a proxy for business investment fell 3.9 percent, the biggest decline in a year. This followed a big increase in December, the final month businesses could take advantage of a one-year investment tax break.

Orders totaled $462.6 billion in January, 37.7 percent above the recession low hit in March 2009 and only 4.6 percent below the previous orders peak set in June 2008. Manufacturing has been one of the bright spots in the recovery.

Durable goods are products expected to last at least three years, such as appliances, cars, machinery and airplanes. Orders tend to sharply fluctuate from one month to the next. But the overall trend in orders has increased since the recession ended nearly three years ago.

Strong auto sales and growing business investment in machinery and other equipment have been keeping factories busy and helping the economy grow.

U.S. factory activity has grown steadily since the recession ended 2 1/2 years ago, as measured by the Institute for Supply Management. The trade group of purchasing managers said the pace of growth slowed slightly in February.

About 9 percent of the nation's jobs are in manufacturing. But last year, factories added 13 percent of new jobs. And in January, about one-fifth of the 243,000 net jobs the economy created were in manufacturing.

The government will release a crucial report Friday on February job growth.

The economy grew at an annual rate of 3 percent in the final three months of last year. A forecasting panel of the National Association for Business Economics said last week that the economy should grow 2.3 percent this year.

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2012-22-05
Monday, 05 Mar 2012 10:22 AM
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