Orders to U.S. factories jump by largest amount in a year

0 Comments | Deseret News (Salt Lake City), May 2, 2007 | by Martin Crutsinger Associated Press

WASHINGTON -- Orders to U.S. factories surged in March by the largest amount in a year, an encouraging sign that the recent slowdown in manufacturing may be ending.

The Commerce Department said Wednesday that total factory orders rose by 3.1 percent in March, pushed higher by a big jump in demand for commercial aircraft and the biggest rise in the category that tracks business investment in new equipment in 2 1/2 years.

The increase was far better than the 2 percent figure that analysts had been expecting and offered hope that manufacturers were beginning to experience rising demand after a recent weak period brought on by troubles in housing and auto sales.

The good news on factory orders followed a report from the Institute for Supply Management that its closely watched gauge of manufacturing activity rose to 54.7 in April, the best showing in 11 months.

The index had dipped below 50 in November and January, indicating the manufacturing sector was contracting, as companies trimmed inventories to cope with the serious slump in housing and an overhang of unsold autos.

The improving data has prompted some economists to say that the worst of the manufacturing slump may be ending.

For March, the government said that orders for big-ticket durable goods rose by 3.7 percent, even better than a preliminary report last week which had put the increase at 3.4 percent.

Orders for nondurable goods, items like petroleum and chemicals, rose by 2.3 percent, the biggest gain since January 2006.

The economy has been in a significant slowdown for the past four quarters, reflecting a serious slump in housing sales that has forced builders to cut back production and lay off workers. The domestic auto industry has also been struggling to cope with slowing sales.

The 3.1 percent rise in total orders followed an increase of 1.4 percent in February and a huge 5.7 percent drop in January. The March gain pushed total orders to $400.2 billion on a seasonally adjusted basis.

For March, the increase was led by a 38.1 percent surge in demand for commercial aircraft. Orders for primary metals and industrial machinery were also strong. But demand for household appliances and furniture both fell, indicating continued troubles in the housing industry.

The Federal Reserve pushed interest rates up for two years in an effort to slow economic growth enough to restrain inflation pressures. The Fed's last rate increase occurred in June 2006 and since that time the central bank has left rates unchanged, a stance that is expected to remain intact when Fed officials meet next week.