US factory orders fell 1 pct. in September, with weakness in aircraft and business investment

WASHINGTON – Orders to U.S. factories fell in September for a second straight month, with a key category that tracks business spending plans also losing ground.

Factory orders dropped 1 per cent in September following a 2.1 per cent decline in August, the Commerce Department reported Tuesday. A category that serves as a proxy for business investment spending slipped 0.1 per cent.

The September result was led by a big 36 per cent fall in the volatile category of commercial aircraft. But the weakness was widespread across other categories including primary metals, machinery and computers.

U.S. manufacturers have been squeezed this year as a strong dollar makes American products less competitive overseas. Weak economies in China and other key foreign markets have also cut into exports.

Orders for motor vehicles and parts edged up a modest 0.4 per cent, but demand in transportation overall was off 3.1 per cent. Outside the volatile transportation sectors, orders were down 1.4 per cent, the fifth drop in the past six months.

Demand for all durable goods, items expected to last at least three years, fell 1.2 per cent. Demand for nondurable goods such as paper, chemicals and food fell 0.8 per cent.

Economic growth as measured by the gross domestic product slowed to a moderate 1.5 per cent rate in the July-September quarter following a 3.9 per cent advance in the second quarter. Many economists are projecting GDP to accelerate to around 2.5 per cent in the current October-December period, as strength in consumer spending offsets continued weakness in manufacturing.

The Institute for Supply Management reported Monday that factory activity slowed in October to its slowest pace since May 2013.

A slowdown in China, the world’s second-largest economy, has delivered a direct hit on construction equipment makers such as Caterpillar. Yet there are signs that China’s economy might be stabilizing: A survey of its manufacturers over the weekend found that its factory activity is still contracting but at a slower pace.

Through September, orders to U.S. factories are down 7.2 per cent compared to the same period in 2014.