Durable-Goods Orders Unexpectedly Fall 1.4 Percent

Published December 24, 2002

| Associated Press

Orders to U.S. factories for big-ticket goods fell 1.4 percent in November, dealing a setback to the nation's manufacturers, which have been struggling to get back on their feet after being knocked down by last year's recession.

The unexpected drop in new orders for costly manufacturered goods came after a 1.7 percent rise in October and marked the weakest showing since September, the Commerce Department reported Tuesday.

November's decline surprised economists, who were forecasting an increase in orders of around 0.8 percent.

Manufacturing has been the weakest link in the national economy's recovery. After staging a decent comeback at the beginning of the year, factory activity has stumbled in recent months. Manufacturers continue to slash jobs.

The Federal Reserve earlier this month held a key interest rate steady at a 41-year low of 1.25 percent. Economists believe the Fed will leave short-term rates at that low level at its next meeting in late January.

Fed policy-makers hope that low rates will keep consumers spending and motivate businesses to boost investment.

While consumers have been carrying the economy all year, businesses' shoulders have been far less broad.

Companies haven't made big capital investments and haven't been in a rush to hire because their profits -- which took a bit hit during last year's recession -- haven't recovered and they face economic uncertainities, including a possible war with Iraq.

A sustained turnaround in capital investment is considered a necessary ingredient to the economy returning to full throttle, economists say.

In November, the weakness in orders for manufacturered goods was fairly widespread, although demand was especially slack for transportation products.

Orders for transportation equipment fell 1.6 percent in November from the previous month, representing a turnaround from October's 1.9 percent increase.

For automobiles and parts, orders dropped by 4.5 percent in November, following a 3.7 percent advance in the previous month.

Airplanes for commercial use saw orders go down by 7.7 percent last month, after dipping 1.7 percent in October.

Excluding transportation products, which can swing widely from month to month, overall orders fell 1.3 percent in November.

Orders for primary metals, including steel, fell 4.6 percent in November, the biggest decline since October 2000. That came on top of a 1.2 percent drop recorded in October.

Machinery orders declined 3.2 percent last month, erasing October's 2.7 percent increase.

For computers, orders dropped 3.7 percent in November, after a 0.9 percent decline. Orders for electrical equipment and appliances dipped 0.6 percent in November, following a 1.9 percent drop.

Shipments, a barometer of current demand, fell 1.3 percent in November, after rising 1.4 percent in October.

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