Factory orders fall 3.3 percent
By Jeannine Aversa
Associated Press
WASHINGTON — A big drop in demand for military airplanes pushed factory orders down in November. But a wide range of goods — from computers to cars — posted gains, suggesting better days may lie ahead for the battered manufacturing sector.
Even though the Commerce Department's report yesterday showed that orders to U.S. factories fell by 3.3 percent in November, economists were encouraged because orders for so many other categories, including the hard-hit high-tech sector, rose.
Manufacturers have borne the brunt of the ailing national economy, which slid into a recession in March. To cope, they have sharply cut production, trimmed hours and laid off workers. Last year, factories shed 1.3 million jobs, or about 7 percent of their work force.
But economists said yesterday's report, along with other recent data, indicate that the worst may be over for the beleaguered industry.
"It's looking to me like the manufacturing sector has hit a bottom," said economist Clifford Waldman of Waldman Associates. "But it is questionable how long manufacturing will be at the bottom. I think we'll see a slow, grudging climb from here."
A more forward-looking report released by the Institute for Supply Management last week showed that a rise in new orders to factories helped push a key gauge of manufacturing activity higher in December, suggesting the sector is beginning to emerge from a 17-month slump.
Before manufacturing can fully recover, however, businesses will have to crank up investment again and foreign companies and consumers must increase their spending on American-made goods, which would boost U.S. exports, said Sal Guatieri, economist at the Bank of Montreal and Harris Bank.
In the November factory orders report, both Waldman and Guatieri said they were especially heartened by the back-to-back increases for the computer and electronic products category. Orders for this group went up by 8.9 percent in October and 1.8 percent in November.
"The back-to-back increases in orders could suggest that the tech wreck is over," said Guatieri. Major spending on high-tech equipment helped to fuel the nation's record 10-year expansion, which ended when the country fell into a recession in March.
The decline in overall orders to U.S. factories in November stemmed from a whopping 82.4 percent drop in new orders for defense aircraft and parts. The month before, orders for this category zoomed up by 491.6 percent, helping to boost total factory orders by 7 percent.
The big drop in orders for defense aircraft and parts masked gains elsewhere.
Excluding orders for defense equipment, orders to U.S. factories rose a solid 0.8 percent in November, on top of an even bigger 2.9 percent advance in October.
The report showed that orders for cars rose 5.2 percent and commercial airplanes and parts posted a 17.2 percent gain in November.
Orders for machinery rose 2.5 percent in November, after slipping by 0.4 percent. For household appliances, orders were up 6.2 percent in November on top of a 5.1 percent gain. Furniture orders rose by 4.8 percent, following a 3.2 percent rise.
For primary metals, the category that includes steel, orders grew by 1.7 percent in November, after falling by 2.1 percent.
Jerry Jasinowski, president of the National Association of Manufacturers, said it was the first time in at least three months that the categories of primary metals, machinery and computers and electronics, all registered increases in orders. He called that a ``first sign that a broad-based turnaround in the manufacturing sector may be beginning to form.''
To revive the economy, the Federal Reserve cut interest rates 11 times in 2001 and many analysts expect those reductions to pave the way for the economy to rebound in the first half of this year.
Still, economists said it will take a while for manufacturing to fully bounce back. With the nation's unemployment rate at 5.8 percent and expected to rise, manufacturers will keep close tabs on consumers, the lifeblood of the economy, before really ratcheting up production and rehiring workers, economists said.
Observed Jasinowski: "Clearly manufacturers are not out of the woods yet and many uncertainties remain."
