Tags: Orders | Factories | Decrease

Orders to Factories Decrease for First Time in Four Months

Friday, 03 December 2010 10:37 AM

Orders placed with U.S. factories fell in October for the first time in four months, held back by a slump in demand for durable goods that signals investments in new equipment may slow.

Bookings for manufacturers’ goods fell 0.9 percent, less than forecast, after a revised 3 percent in September that was larger than previously estimated, figures from the Commerce Department showed today in Washington. Orders for goods meant to least at least three years decreased 3.4 percent.

Combined with today’s report from the Labor Department that showed payrolls climbed less than forecast, the drop in bookings indicates companies may be concerned the economic recovery will be slow to strengthen. At the same time, businesses like Dow Chemical Co. are seeing a steady flow of demand, showing the economy will keep expanding.

“I don’t think we’re in for a prolonged downtrend in new orders but this is a reflection of the weakness we saw in demand over the summer,” Scott Anderson, a senior economist at Wells Fargo Securities Inc. in Minneapolis, said before the report. “We had a buildup of inventories over the summer and that’s having a consequence.”

Payrolls increased by 39,000 workers last month, less than the most pessimistic projection of economists surveyed by Bloomberg News, Labor Department figures showed today. The jobless rate rose to 9.8 percent, the highest since April, while hours worked and earnings stagnated.

Median Forecast

Economists forecast factory orders would fall 1.2 percent in October, according to the median of 69 projections in a Bloomberg News survey. Estimates ranged from a drop of 2.5 percent to a 1 percent increase.

Manufacturing, which accounts for 11 percent of the economy, expanded in November near the fastest pace in five months, a report from the Institute for Supply Management showed earlier this week.

The drop in durable goods orders, which make up over half of total factory demand, was little changed from the 3.3 percent decrease estimated by the government Nov. 24.

Orders for capital goods excluding aircraft and military equipment, a measure of future business investment, fell 4.3 percent after rising 1.8 percent in September. Last week’s durable goods estimate showed a 4.5 percent drop in October and a 0.2 percent decrease in September for these items.

Demand for so-called core capital goods tends to fall in the first month of each quarter, suggesting swings in demand the government isn’t able to capture with its seasonal adjustments. Since 2006, there have been only three quarters that broke this pattern and none have done so since April 2008.

Fewer Shipments

Shipments of non-defense capital goods excluding aircraft, which is used in calculating gross domestic product, decreased 1.3 percent, compared with the 1.5 percent estimated in last week’s durable goods report.

The world’s largest economy grew at a 2.5 percent annual pace from July through September, the Commerce Department said last week. Business spending on equipment and software advanced at a 16.8 percent rate, while corporate profits increased 2.8 percent and were up 28 percent from a year earlier.

Bookings for non-durable goods, including food, petroleum and chemicals, climbed 1.5 percent, today’s report showed.

Factory inventories climbed 0.9 percent in October, and manufacturers had enough goods on hand to last 1.28 months at the current sales pace, the most in a year.

Rising exports, which reached a two-year high in September, and improving consumer spending has prompted some companies to boost production to meet demand and also increase their own orders to replace aging equipment.

Dow, the world’s second-biggest chemical company, said Nov. 30 that fourth-quarter sales are matching those of the prior three months, led by demand for materials used in electronics.

Electronics demand is “going gangbusters,” and commodity plastics and chemical sales are still strong, Bill Weideman, chief financial officer, said in an investor presentation. “Overall demand is very solid.”

© Copyright 2019 Bloomberg News. All rights reserved.

1Like our page
Orders placed with U.S. factories fell in October for the first time in four months, held back by a slump in demand for durable goods that signals investments in new equipment may slow.Bookings for manufacturers goods fell 0.9 percent, less than forecast, after a revised 3...
Friday, 03 December 2010 10:37 AM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved