WASHINGTON – Orders to U.S. factories rose in September after two months of declines on a big jump in demand for commercial aircraft. But businesses cut back sharply on orders for machinery and other goods that signal their confidence to expand, signs of slower economic growth.
The Commerce Department said Monday that factory orders increased 1.7 per cent in September from August. That followed a 0.1 per cent decline in August and a 2.8 per cent plunge in July.
The September gain was driven by a 57.7 per cent jump in demand for aircraft.
But so-called core capital goods, which include machinery and electronics, fell 1.3 per cent in September. It was dragged lower by a 23.6 per cent drop in machinery demand, with big declines in construction machinery, electric turbines and generators.
Economists pay closer attention to core capital goods because they exclude more volatile orders for defence and aircraft and are a better gauge of businesses’ plans to invest. The decline was the second in three months and points to weaker activity at factories in the July-September quarter.
Orders for durable goods, items expected to last at least three years, increased 3.8 per cent in September, largely on the airplane gains. The big rise in demand for aircraft helped offset a 0.7 per cent dip in demand for autos and auto parts. That decline is expected to be temporary given the strength in auto sales this year.
Demand for non-durable goods, such as chemicals, paper and food, edged down 0.2 per cent.
Many analysts forecast weaker economic growth in the second half of the year. They are predicting growth at an annual rate of around 1.8 per cent in the July-September quarter and roughly 2 per cent in the October-December quarter. Both rates would be lower than the 2.5 per cent growth pace in the April-June quarter.
Still, recent manufacturing reports have been mixed.
A closely watched survey of U.S. purchasing managers said manufacturing expanded in October fastest pace in 2 1/2 years. The Institute for Supply Management’s manufacturing survey increased for the fifth straight month, suggesting the 16-day partial shutdown of the government had little effect on manufacturers. Gains appeared to be driven by overseas growth, healthy U.S. auto sales and the housing recovery.
The government combined the release of the September and August reports on factory orders. The August report had been delayed by the 16-day partial government shutdown