WASHINGTON – Orders to U.S. factories slipped for a third straight month in October and would have fallen even more except for a big jump in defense orders. A key category that tracks business investment spending fell for a second straight month.
Factory orders fell 0.7 percent in October following declines of 0.5 percent in September and 10 percent in August, the Commerce Department reported Friday.
Demand for machinery, computers and primary metals were all down. An important category that is viewed as a proxy for business investment plans fell 1.6 percent following a 1.1 percent decline in September.
The overall decline would have been larger except for a surge in military orders, which jumped 21.2 percent in October, reflecting strong demand for military aircraft. Economists expect the recent weakness will be temporary.
Orders for durable goods, items expected to last at least three years, edged up a slight 0.3 percent following two months of declines but excluding defense, orders would have fallen 0.7 percent. Orders for nondurable goods such as chemicals and paper, fell 1.5 percent in October after a 0.2 percent drop in September. Some of that decline reflects falling energy prices.
Orders for transportation equipment rose 3.4 percent in October, helped by a small 0.6 percent gain in demand for motor vehicles and a 45.3 percent surge in orders for military airplanes. Orders for commercial aircraft edged down 0.1 percent in October.
Demand for machinery dropped 1.4 percent, orders for computers were down 12.7 percent and orders for primary metals such as steel fell 2.4 percent.
Economists say these declines will be temporary. They note that spending by businesses on new equipment grew at a solid annual rate of 10.7 percent in the third quarter and they expect further gains in coming months as businesses ramp up spending to expand and modernize their operations.
The Institute for Supply Management, a trade group of purchasing managers, reported Monday that its closely watched gauge of manufacturing activity slipped a modest amount in November to a reading of 58.7, down from 59 in October, which matched a three-year high reached in August. Any reading above 50 signals expansion.
Manufacturing has been a key driver of U.S. growth this year even as it has fallen off overseas in such key economies as China and Europe.