WASHINGTON – New orders for U.S. manufactured goods climbed in October at their fastest rate in over a year, the government said on Friday, offering further evidence of a revival in the long-slumping factory sector.
The gain, which was close to the 2 percent rise expected on Wall Street, reflected a revised 3.4 percent surge in demand for expensive, long-lasting durable goods and a 0.7 percent increase in items expected to last less than three years.
The bond market, ged earlier in the day on weaker-than-expected payrolls figures, shrugged off the report, while the dollar slipped slightly back toward earlier session lows against the euro.
Orders for transportation equipment were up a strong 5.5 percent in October, reflecting a big gain in civilian aircraft orders. Stripping out demand for transportation-related goods, factory orders were up a less robust, but still solid 1.6 percent.
"This is yet another indicator of improving conditions in manufacturing. No doubt about that," said Patrick Fearon, an economist at A.G. Edwards & Sons in St. Louis.
The Institute for Supply Management (search) said on Monday its index of manufacturing activity rose to 62.8 in November, the highest level in almost 20 years.
But despite the new-found strength, U.S. manufacturers have yet to create jobs.
The Labor Department said earlier on Friday manufacturing payrolls shrank by 17,000 in November, the 40th consecutive month of layoffs.
Shipments of factory goods rose 0.7 percent in October, pushing the inventory-to-shipments ratio down to a record low 1.29.
Economists say historically lean inventories will likely lead manufacturers to boost output to help businesses restock their shelves.
"At some point, with inventories this lean, the continued strength in demand is likely to fuel even stronger production gains," Fearon said. "If factories have to ramp up production, eventually they'll be increasing their hiring as well."
Non-defense, non-aircraft capital goods orders, which economists use to gauge business spending plans, rose 1.8 percent in October, suggesting a third-quarter surge in business investment was not a flash in the pan.
The department said last week business investment climbed at a sharp 14 percent annual rate last quarter, suggesting a long capital-spending downturn that had pulled the economy into recession in 2001 has drawn to a close.