Factory Goods Orders Fall, But Trend Points to Recovery

Randall Hill/Reuters

New orders for U.S.-made goods fell in November, weighed down by a plunge in the volatile civilian aircraft category, but the underlying trend suggested manufacturing is gradually firming.

Factory goods orders declined 2.4%, the Commerce Department said Jan. 6 after an upwardly revised 2.8% increase in October. The November drop followed four straight months of gains and was the biggest decline since December 2015.

Economists polled by Reuters had forecast factory orders decreasing 2.2% in November after a previously reported 2.7% gain in October.

The department also said orders for non-defense capital goods excluding aircraft — seen as a measure of business confidence and spending plans — rose 0.9% in November as reported last month.

Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, gained 0.2% in November as previously reported.

A report during the week of Jan. 2 showed factory activity hitting a two-year high in December, driven by a surge in new orders.

Manufacturing, which accounts for about 12% of the economy, is gaining some muscle after a prolonged period of decline, spurred by a strong dollar and lower oil prices. The sector is getting a lift from rising oil prices, which have led to an increase in well drilling.

Still, manufacturing remains constrained by dollar strength.

In November, orders for transportation equipment tumbled 13.2%, the largest drop since August 2014, reflecting a 73.8% decline in civilian aircraft orders.

Orders for primary metals jumped 2.2%, the biggest rise since December 2015. Machinery orders increased 1.4%, the largest gain since January last year. 

There were increases in orders for computers and electronic products, and electrical equipment, appliances and components.

Shipments of overall factory goods slipped 0.1% in November after rising 0.2% the prior month. Inventories of factory goods increased 0.2 %. That left the inventories-to-shipments ratio unchanged at 1.34 in November.

Unfilled orders at factories dipped 0.1% after rising 0.8% in October.