Factory Orders Drop More than Expected in November

By: Martin Crutsinger AP
By: Martin Crutsinger AP

WASHINGTON (AP) - Orders to factories fell for a record fourth straight month in November, and analysts believe manufacturing will
continue to suffer in coming months as the country slogs through a
recession entering its second year.

The Commerce Department said Tuesday that orders declined by 4.6 percent in November, nearly double the 2.5 percent drop economists
expected. Orders have been falling since August, including a 6
percent plunge in October, the biggest setback in eight years.

The weakness in November reflected a big drop in demand for commercial aircraft. Weakness also was seen in autos, primary metals such as steel, and defense communications equipment.

Separately, the Institute for Supply Management reported Tuesday that a closely watched gauge of activity in the services sector rose slightly in December but still remained at recessionary levels. And the National Association of Realtors said pending home sales in November fell to the lowest level in the eight-year history of its index.

On Wall Street, stocks rose moderately following the mostly disappointing economic readings. In early afternoon trading, the Dow Jones industrial average was up more than 45 points, after rising as much as 122 points earlier in the session.

The factory orders report showed that demand for durable goods, items expected to last three or more years, fell by 1.5 percent in November, even worse than the government's initial estimate two weeks ago that durable goods had fallen 1 percent.

Demand for nondurable goods, items such as food, paper and petroleum products, dropped by 7.4 percent in November following a
3.8 percent decline in October. The declines for nondurable goods
reflect falling demand and a big drop in prices, particularly for energy products.

The declines in November were led by a 37.7 percent plunge in demand for commercial aircraft, an extremely volatile series. Boeing Co. has been seeking to resume normal operations following the interruptions caused by a strike last year.

Demand for autos slipped by 0.1 percent following an even larger 4.1 percent fall in October as automakers continue to struggle with the economic downturn.

The Bush administration last month announced that it would lend $17.4 billion to General Motors Corp. and Chrysler LLC from the government's $700 billion rescue fund in an effort to buy them time to reorganize and avoid having to file for bankruptcy.

Excluding transportation, orders would have posted a 4.2 percent decline in November. Demand for primary metals such as steel fell by 2.7 percent, while orders for defense communications equipment were down 12.1 percent.

Demand for heating and air conditioning products fell by 11.6 percent in November, reflecting in part the hard times the nation's homebuilders are enduring.

The Realtors trade group said its seasonally adjusted index of pending sales for existing homes fell to 82.3 in November from a downwardly revised October reading of 85.7. That was far worse than the reading of 88 that economists expected, according to a survey by Thomson Reuters.

Economists are concerned that the manufacturing sector is being hit not only by a recession in the United States but spreading weakness overseas which has pushed many of America's major trading partners into downturns and cut into domestic export sales.

(Copyright 2009 by The Associated Press. All Rights Reserved.)


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