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Factory Orders Up 1.1 Percent

Tue, 01/05/2010 - 6:50am
Martin Crutsinger, AP Economics Writer

WASHINGTON (AP) -- Orders to U.S. factories posted a surprisingly big gain in November, reflecting strong demand in a number of industries from steel and industrial machinery to computers and chemicals.

The advance was double what had been expected and provided further evidence that manufacturers are beginning to pull out of their steep slump.

The Commerce Department said Tuesday that orders rose by 1.1 percent in November, much better than the 0.5 percent increase economists had forecast. The increases were widespread outside of autos and aircraft, which posted declines.

The report was the latest evidence of a widespread rebound in manufacturing as industries from China to Europe are beginning to flash recovery signs. The Institute of Supply Management had reported Monday that its key gauge of U.S. factory activity showed manufacturing was expanding in December at the fastest pace in more than three years.

The Commerce report on orders showed that demand for durable goods, items expected to last at least three years, rose by 0.2 percent in November, unchanged from a preliminary estimate the government made two weeks ago. Durable goods orders had fallen by 0.7 percent in October.

Orders for nondurable goods rose by 1.8 percent in November after an even stronger 2.2 percent rise in October. The strength in November reflected gains in demand for petroleum, chemical products and textiles.

In the durable category, orders for commercial aircraft dropped sharply and demand for motor vehicles was also down but orders increased in a number of other areas from iron and steel, up 4.6 percent, to machinery, up 3.3 percent, and computers and electronics products which shot up by 12.8 percent.

The 1.1 percent rise in total orders in November was the seventh increase in the past eight months and left factory orders at a seasonally adjusted $365.3 billion.

Economists are hoping that the fortunes of the manufacturing sector are beginning to rebound as the economy struggles to emerge from the worst recession since the 1930s.

The overall economy as measured by the gross domestic product grew at an annual rate of 2.2 percent in the July-September quarter. That marked the first positive increase in the GDP after four consecutive quarterly declines.

Analysts are expecting an even bigger gain in the just-completed October-December quarter with some of that strength coming from a revival in the fortunes of manufacturers.

Further gains are expected in December given that the ISM report showed its index for new orders jumped to the highest level last month in five years.

It is hoped that factories will begin rehiring laid off workers as they ramp up production. And a turnaround in employment could boost incomes and increase consumer spending, fueling the recovery.

The worry among economists has been that the current recovery could falter unless the unemployment rate begins to show sustained improvement.

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