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Factory Orders Jump 1.8 Percent

Thu, 04/02/2009 - 8:05am
Martin Crutsinger, AP Economics Writer

WASHINGTON (AP) -- Orders to U.S. factories posted an increase in February after six straight monthly declines, providing another glimmer of hope that the economy's deep plunge may be starting to moderate.

The Commerce Department said Thursday that orders for manufactured products rose by 1.8 percent in February, much better than the 1.1 percent decline that economists had expected.

The rebound may well prove temporary given all the forces that are continuing to batter the economy. But still, analysts said a string of better-than-expected reports in recent days could at least be signaling that the severe slide that has occurred may be starting to ease slightly.

The increase in total factory orders was led by a 3.5 percent gain in demand for durable goods, items expected to last at least three years. That was slightly better than a preliminary government estimate last week that durable goods orders had risen by 3.4 percent in February.

Non-durable goods, products such as chemicals, food and paper, showed a 0.3 percent rise in February following a 0.5 percent gain in January.

The strength last month included a big swing in demand for machinery with orders jumping 12.7 percent in February, the biggest one-month gain in nearly 15 years.

Orders for non-defense capital goods excluding aircraft, seen as a good proxy for business investment plans, showed a 1.4 percent drop in February. Business investment spending plunged during the fourth quarter of last year, one of the sectors that contributed to the economy's overall decline at an annual rate of 6.3 percent, the biggest decrease in the gross domestic product since 1982.

Orders for transportation goods rose by 2.7 percent in February even though demand for commercial aircraft plunged by 29 percent. That weakness was offset by big gains for defense aircraft and a 1.1 percent rise in demand for motor vehicles and parts. The auto increase could prove temporary given all the problems facing automakers trying to sell cars in the midst of the country's worst recession in a quarter-century.

Automakers reported Wednesday that March sales were down 37 percent compared to a year ago with sales at General Motors Corp. off by 45 percent compared with March 2008 while Ford Motor Co. reported a 41 percent decline and sales at Chrysler LLC were down 39 percent.

The Obama administration told GM and Chrysler this week that they would need to make significant changes quickly in order to receive the billions of dollars in extra support they are seeking from the government's bailout fund.

Manufacturers have been battered by the current recession, already the longest in a quarter-century, as demand shrinks at home and overseas.

A trade group's measure of the health of the manufacturing sector signaled that manufacturing remained in recession for a 14th straight month in March. The Institute for Supply Management said Wednesday that its manufacturing index rose to 36.3 last month from 35.8 in February. Economists expected the index to rise to 36. A reading below 50 signals contraction, and the index hit a 28-year low of 32.9 in December.

Excluding transportation, orders showed a 1.6 percent increase in February, much better than the 0.9 percent decline that economists had expected.

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