Factory Orders Drop 0.4 Percent in February

The 0.4 percent dip reported by the Commerce Department Tuesday left orders at a seasonally adjusted $363 billion, the lowest level since October 1999.

In January, factory orders were down by 4.3 percent, according to revised figures. That was weaker than the government previously estimated.

The Federal Reserve has slashed interest rates three times this year to stave off recession. The cuts, which total 1.5 percentage points, lower borrowing costs. They are aimed at encouraging consumer and business spending, which eventually would boost economic growth.

The economic slowdown has hit the manufacturing sector hardest, causing companies to sharply cut production, trim jobs and reduce work hours to cope with flagging demand.

On Monday, a report by the National Association of Purchasing Management showed that manufacturing activity fell in March for the eighth month in a row. But the decline was at a slower rate than in January and February, which some economists found a bit encouraging.

In the factory orders report, industrial equipment, including machine tools and computers, posted the biggest drop in orders of 3.1 percent. That followed a 3.7 percent increase in January.

Orders for fabricated metal products declined by 3.7 percent in February, the largest decrease since May 1997. In January, such orders fell by 1.2 percent.

Transportation equipment saw orders go down by 1.3 percent after a huge 24.2 percent plunge the previous month. These orders, which include cars, airplanes, ships and military tanks, can swing widely from month to month.

Excluding transportation equipment, overall orders to factories fell by 0.3 percent in February, the third straight monthly decline.

Primary metals, the category that includes steel, saw orders decrease by 0.5 percent for the second month in a row.

Shipments, a good barometer of current demand, fell by 0.5 percent in February, marking the sixth consecutive decrease. Industrial machinery had the largest decrease with shipments falling 4.7 percent, the biggest drop since July 1986. The weakness was led by slackened demand for computers and office equipment.

There was a bright spot in the report. Orders for electronics and electrical equipment, including household appliances and communications equipment, rose 5.0 percent in February, after a 8.6 percent drop the month before.