WASHINGTON – U.S. factory orders for long-lasting manufactured goods slumped in November, largely due to falling demand in the military and defence sectors.
The Commerce Department said Tuesday that orders for durable goods dropped 0.7 per cent last month, the third decline in the past four months. Much of the decrease came from a steep 8.1 per cent plunge in demand for defence-related items.
Orders for metal products and electronics also slid in November. The decline overwhelmed the gains notched in autos, civilian aircraft and machinery.
A key category that economists view as a proxy for business investment spending — which excludes volatile aircraft and defence orders — was flat last month. That marks an improvement from declines of 1.9 per cent in October and 1.1 per cent in September.
The weak performance in this core category suggests that businesses are hesitant to invest, said Diane Swonk, chief economist at Mesirow Financial. That creates a mixed picture for growth in the months ahead, after strong consumer spending in recent months has helped bolster the economy.
“Businesses are not as excited about growth as consumers who spent with abandon in November,” Swonk said.
November’s drop in factory orders contrasts with an otherwise strong year for manufacturing, driven in part by strong auto sales. Economists believe the underlying demand for durable goods, items expected to last at least three years, will remain strong, reflecting in part the projected investment plans of businesses to buy new equipment to expand and modernize their operations.
Several other indicators point to continued growth.
The Federal Reserve said earlier this month that factory production rose 1.1 per cent in November, up from a 0.4 per cent improvement in October. Manufacturing output has risen 4.8 per cent over the past 12 months. It’s now above the previous high set just before the start of the Great Recession in December 2007
An index tracked by the Institute for Supply Management, a trade group of purchasing managers, also points to greater factory activity. Its manufacturing index fell to 58.7 last month from 59 in October. Still, any reading above 50 signals expansion. October’s figure matched a three-year high reached in August.