Report: Factory orders plummet in February

The decline in orders reached unexpected levels, further hinting at an approaching recession.

04/04/2008


Orders to U.S. factories fell for a second straight month, a worse-than-expected performance that reinforced worries that the risk of recession is rising, an Associated Press report said Wednesday.
The Commerce Department reported that factory orders dropped by 1.3% in February, about double the downturn that economists had been expecting. Orders had fallen an even bigger 2.3% in January, the largest decline in five months. The falloff in demand was widespread, with steep declines in orders for motor vehicles, various types of heavy machinery and demand for iron and steel.
Aaron Smith, an economist with Moody's Economy.com, noted that inventories of unsold manufacturing goods have now risen for six straight months, indicating further weakness ahead as factories are forced to cut production to prevent a sizable increase in unwanted stockpiles.
The report on factory orders showed demand falling by 1.1% for durable goods %%MDASSML%% items expected to last at least three years %%MDASSML%% while orders for nondurable goods %%MDASSML%% products such as oil and chemicals %%MDASSML%% fell by 1.5%.
The weakness in manufacturing occurred even though orders for commercial airplanes rose by 5.1% in February, rebounding from a big decline in January. Orders for motor vehicles fell by 2% in February after no gain in January. Automakers are struggling with weak demand in the face of soaring gasoline prices.
Overall, orders for transportation products posted a 1.8% rise in February as the strength in commercial and defense aircraft orders as well as higher demand for ships and boats offset the drop in motor vehicles. Orders for heavy machinery plunged by 12.3% in February, the biggest decline since January 2004, while orders for iron and steel fell by 2.3%.





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