Orders placed with U.S. factories fell in August by the most in more than three years, signaling that slowdowns in business investment and exports restrained the economic expansion.
The 5.2 percent decrease in bookings was the biggest since January 2009 and followed a revised 2.6 percent increase in July, the Commerce Department said today in Washington. The median forecast of economists in a Bloomberg News survey called for a decline of 5.9 percent. Demand for durable goods dropped 13.2 percent, the same as reported last week, while shipments of non-durables, which includes such things as petroleum and chemicals and often reflect swings in price, climbed 2.2 percent.
Factories are feeling the effects of Europe’s debt crisis and a slowdown in China and other Asian markets. In the U.S., concerns about a fiscal cliff of tax increases and government spending cuts set for January also are putting the brakes on business investment, which has been a mainstay of the expansion.
“These data indicate that the recent softness in manufacturing activity and capital spending is likely to continue, at least for several more months,” Steven Wood, president of Insight Economics LLC in Danville, California, said in a note to clients.
Economists’ forecasts in the Bloomberg survey ranged from declines of 1.2 percent to 8 percent.
The number of Americans filing first-time claims for unemployment insurance payments rose last week, highlighting an uneven improvement in the labor market, figures from the Labor Department also showed today. Applications for jobless benefits increased 4,000 to 367,000 in the week ended Sept. 29. Economists forecast 370,000 claims, according to the median estimate in a Bloomberg survey. The prior week’s reading was the lowest in two months.
Stocks held earlier gains after the reports. The Standard & Poor’s 500 Index climbed 0.6 percent to 1,459.82 at 11:16 a.m. in New York as investors awaited tomorrow’s employment data for September.
The drop in factory orders was paced by a 101.8 percent plunge in demand for commercial aircraft, the same as reported last week, and a 3.4 percent drop in computers and electrical equipment, today’s Commerce Department report showed.
Excluding the volatile transportation category, factory orders increased 0.7 percent in August for a second month.
Orders for durable goods represent demand for items made to last at least three years and make up more than half of total factory bookings. The increase in demand for non-durable goods, the only part of today’s report that hasn’t been previously reported, reflected a 6.9 percent gain in petroleum and coal products and an 11.8 percent jump in tobacco.
Orders for capital goods excluding aircraft and military equipment, a measure of future business investment increased 1.1 percent, the same as reported last week and following declines of 5.6 percent and 2.7 percent in the prior two months. Shipments of those goods, which are used in calculating gross domestic product, decreased 0.7 percent after dropping 1.6 percent in July.
Applied Materials Inc. (AMAT), the largest producer of chipmaking equipment, said yesterday it plans to eliminate 900 to 1,300 jobs, or 6 percent to 9 percent of its worldwide workforce.
Applied Materials’ customers, such as Intel Corp., are struggling with slowing orders for personal-computer components, reducing their appetite for spending on increasing output.
Micron Technology Inc. (MU), the largest U.S. maker of memory chips, last week reported a wider fourth-quarter loss and lower revenue as lackluster demand for personal computers reduced sales of components.
Another report this week indicated the slump in manufacturing may be easing. Factories unexpectedly expanded in September as orders and production improved, according to data from the Tempe, Arizona-based Institute for Supply Management.
Automakers have been one source of strength, with cars and light trucks selling at an annualized rate of 14.9 million last month, the industry’s best sales since March 2008. Toyota Motor Corp. (7203) reported the biggest September gain, with sales surging 42 percent from the same time last year, more than the average estimate of analysts in a Bloomberg survey. Chrysler Group LLC posted a 12 percent gain over September 2011, its 30th month of year-over-year sales growth.
The U.S. averaged a 14.5 million annualized sales rate in the third quarter, the fastest since the 15.3 million pace set in 2008’s first quarter, according to researcher Autodata Corp., based in Woodcliff Lake, New Jersey.
“The stiffest headwinds are uncertainty, some of which is related to the sovereign debt crisis in Europe and concerns about the pace of growth here at home,” Kurt McNeil, vice president of U.S. sales operations at General Motors Co. (GM), said on an Oct. 2 call with analysts. “‘Still, we believe all of the factors are net positive. In other words, autos will continue to be a bright spot for the U.S. economy.”
Factory inventories increased 0.6 percent in August for a second month, today’s Commerce Department report showed, while shipments fell 0.3 percent, bringing the inventory-to-shipments ratio up to 1.28 months from 1.27 months.
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