Factory orders up 1.7% on aircraft sales

By MARTIN CRUTSINGER THE ASSOCIATED PRESS, Nov. 5, 2013

WASHINGTON - Orders to U.S. factories rose in September on a big jump in commercial aircraft demand. But businesses cut back sharply on machinery and other goods that signal their confidence to expand, a sign of slower economic growth.

The Commerce Department said Monday that factory orders increased 1.7 percent in September from August. That followed a 0.1 percent decline in August and a 2.8 percent plunge in July.

The September gain was driven by a 57.7 percent jump in demand for aircraft.

Core capital goods, which include machinery and electronics, fell 1.3 percent in September. Demand for machinery plummeted 23.6 percent, with big declines in construction pieces, electric turbines and generators.

The decline suggests businesses may have been worried about the economy before the 16-day partial government shutdown, which began Oct. 1.

Economists pay close attention to core capital goods. They are viewed as a better gauge of companies’ plans to invest because they exclude more volatile orders for aircraft and defense equipment.The decline was the second in three months and points to weaker activity at factories in the July-September quarter.

Orders for durable goods, items expected to last at least three years, increased 3.8 percent in September, largely on the airplane gains. The big rise in demand for aircraft helped offset a 0.7 percent dip in demand for autos and auto parts. That decline is expected to be temporary given the strength of auto sales this year.

Demand for nondurable goods, such as chemicals, paper and food, edged down 0.2 percent.

Many analysts forecast weaker economic growth in the second half of the year. They are predicting growth at an annual rate of about 1.8 percent in the July-September quarter and roughly 2 percent in the October-December quarter. Both rates would be lower than the 2.5 percent pace in the April-June quarter.

Still, recent manufacturing reports have been mixed.

A closely watched survey of U.S. purchasing managers said manufacturing expanded in October at the fastest pace in 2½ years. The Institute for Supply Management’s manufacturing survey increased for the fifth straight month, suggesting the shutdown had little effect on manufacturers. Gains appeared to be driven by overseas growth, healthy U.S. auto sales and the housing recovery.

The government combined the release of the September and August reports on factory orders. The August report had been delayed by the shutdown.

Business, Pages 23 on 11/05/2013