Orders to U.S. factories for big-ticket manufactured goods posted a modest increase in December, but the gain was not enough to prevent orders from plunging by a record amount for the entire year.
The Commerce Department said Thursday that orders for durable goods edged up a slight 0.3 percent last month, a much weaker showing than the 2 percent advance economists had been expecting.
For all of 2009, durable goods orders plunged by 20.2 percent, the largest drop on records that go back to 1992. The decline highlighted the battering that U.S. manufacturers have suffered during the recession. Economists are hoping that improving outlooks in the U.S. and globally will make 2010 a better year for U.S. manufacturers.
The 20.2 percent orders decline last year followed a 5.8 percent drop in 2008, the first back-to-back annual declines since 2001 and 2002, a period when the country was also dealing with a recession.
However, the declines were much steeper this time around, reflecting the tough times in manufacturing as General Motors and Chrysler were forced into bankruptcy filings and the total manufacturing industry shed thousands of jobs, contributing to the 7.2 million jobs lost since the recession began in December 2007.
The hope is that both the U.S. and global economies are now mounting rebounds that will boost demand for manufactured goods and lead factories to rehire laid off workers. The expectation is that U.S. exports will also benefit from a decline last year in the value of the dollar. A weaker dollar makes U.S. goods more competitive on overseas markets.
For December, the 0.3 percent gain in orders followed a revised decline of 0.4 percent in November, a drop that was previously reported as a small gain of 0.2 percent. Orders fell by 0.1 percent in October after posting a sizable 2.5 percent rise in September.
The December increase was supported by a 3.6 percent jump in orders for motor vehicles and parts, the biggest one-month gain in this troubled sector since May 2007. Orders for aircraft, a volatile category, plunged by 38.2 percent in December after an even bigger 40 percent drop in November.
Total transportation orders fell by 2 percent. Excluding transportation, orders for durable goods would have been flat in December after a 2.1 percent November gain. This category has posted gains for three of the last four months.
Strength last month came in such areas as primary metals including steel, up 8.1 percent, and machinery, up 6 percent. Demand for computers and other electronic products fell by 3 percent.
If factories can begin to hire back laid off workers, the turnaround in employment will boost incomes and increase consumer spending, thus fueling the recovery.
Heavy-equipment manufacturer Caterpillar reported Wednesday that its fourth-quarter profit tumbled but that it expected sales to rebound in 2010, helped by rising demand in China and other developing nations.
Steelmakers United States Steel Corp. and Nucor Corp. on Tuesday indicated they believe the steel market will gradually improve this year as the economy rebounds, though they warned that demand in commercial construction remains weak. On Monday, AK Steel Holding Corp. credited increased demand, particularly from automotive customers, for a better-than-expected fourth-quarter profit and said it sees further improvement this year.
The overall economy grew at an annual rate of 2.2 percent in the July-September quarter, the first quarterly gain after four consecutive declines as the country was hit by the worst recession since the 1930s. The government will release its first look at fourth-quarter gross domestic product on Friday.
Economists are expecting that report will show GDP grew at a sizzling 4.5 percent annual rate in the closing three months of last year. However, they expect growth will slip again in future quarters unless consumers begin to grow more confident and start spending at a faster clip.
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