economic indicators

Factory orders in U.S. decrease by the most in 5 months

ORDERS FROM U.S. factories fell to a five month low in January.
Posted 3/6/13

WASHINGTON - Orders to U.S. factories fell in January by the most in five months, weighed down by a slump in demand for military hardware and commercial aircraft.

Bookings dropped 2 percent after a revised 1.3 percent increase in December, Commerce Department data showed today in Washington. Economists projected a 2.2 percent decline, according to the median forecast in a Bloomberg survey. Demand for durable goods decreased 4.9 percent, little changed from the 5.2 percent drop estimated last week, while non-durables climbed 0.6 percent on gains in petroleum and chemicals.

The biggest jump in machinery including construction equipment and generators in almost five years is helping boost manufacturing. A pickup in business spending indicates companies are looking beyond the fiscal-policy battles in Washington as sales improve.

“Manufacturing is looking a bit stronger than it was in the second half of last year,” Robert Mellman, senior economist at JPMorgan Chase & Co. in New York, said before the report. “Housing is going gangbusters, other parts of the economy are doing better, and the inventory cycle has turned positive. Foreign demand in some places might start to pick up.”

Estimates of 63 economists ranged from declines of 0.5 percent to 4.5 percent. The Commerce Department revised the December figure from an initially estimated 1.8 percent gain.

Excluding transportation equipment, factory orders rose 1.3 percent in January after a 0.1 percent drop the prior month. Boeing Co., the Chicago-based aerospace company, said it received two orders in January, down from 183 the prior month. Boeing is contending with safety concerns related to batteries on its 787 Dreamliner.

Military orders

Orders for military capital goods slumped 69.7 percent after jumping 107.2 percent in December, today’s report showed. Excluding defense, bookings rose 0.3 percent in January after declining 0.2 percent the prior month.

While these orders are volatile month to month, they highlight the risk that across-the-board federal budget cuts, known as sequestration, represent for the world’s largest economy. About $1.2 trillion in reductions over the next decade began taking effect at the start of March.

Orders for capital goods excluding aircraft and military equipment, a measure of future business investment, advanced 7.2 percent, the biggest gain since September 2004, after falling 0.8 percent in December. The gain was revised up from the 6.3 percent increase reported in last week’s durable goods report.

Shipments of such equipment, which are used in calculating gross domestic product, decreased 1.1 percent after a 0.1 percent gain the prior month.

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