WASHINGTON (AP) — Orders to U.S. factories rose broadly in September, propelled by business spending on commercial airplanes, boats and machines.
The Commerce Department says that factory orders rose by 2.1 percent in September, the steepest increase since January. Orders were flat in August.
Excluding the volatile transportation sector, orders rose 0.4 percent, after gaining 1.3 percent in August.
Business spending on costly, long-lasting goods such as airplanes and heavy machines produced most of the demand. But consumer spending also rose by 1.0 percent, after running flat in August.
Economists have worried that recession-weary consumers will not spend enough to keep factories moving as business spending subsides. Wednesday's report may ease those fears.
November 3, 2010
WASHINGTON (AP) — Orders to U.S. factories likely grew in September as surging demand for commercial aircraft offset a worrying decline in investment by businesses.
Economists for TD Bank Financial Group were forecasting that factory orders gained 1.0 percent for the month after falling by 0.5 percent in August. That was the third drop in the past four months. Economists surveyed by Thomson Reuters expect a 1.6 percent rise.
However, excluding the volatile transportation sector, orders in August rose by a healthy 0.9 percent. That's because businesses invested more in long-term goods needed for growth, such as equipment and machinery.
The Commerce Department will release the September report at 10 a.m. on Wednesday. The report covers demand for long-lasting, costly durable goods; and for nondurable goods such as clothing, chemicals and paper.
Wednesday's report will give clues about the state of the key manufacturing sector. Factories have been a key driver of the economic recovery. If the manufacturing recovery loses force, the broader economy will suffer.
The report expands on last week's announcement about demand for longer-lasting durable goods. The Commerce Department said orders for durable goods rose by 3.3 percent in September, thanks to a 15.7 percent increase in orders for commercial airplanes and auto parts and equipment. Without transportation, orders for durable goods fell by 0.8 percent.
Businesses spent 0.6 percent less in September on long-term goods needed for growth, the earlier report said. That followed months of strong demand in the category.
During the recession, companies avoided replacing outdated equipment or restocking inventories. As the nation recovered, business spending boomed. That demand boosted factories. Manufacturing became a rare bright spot in the economic recovery.
In recent months, business spending has been less reliable as a source of demand. Companies are worried that the economic malaise will drag on, because high unemployment is depressing consumer spending.
The government said this week that consumer spending grew in September at its slowest pace in three months. Incomes fell for the first time in 14 months.
Without consumer spending, economists fear, factories will stop increasing production. Consumers are the single largest driver of economic growth.
Economists hoped that consumers demand would return by the end of the business spending cycle. That hasn't happened.