Factory orders plummet in August

A commercial plane at The Boeing Company at http://www.boeing.com
A commercial plane at The Boeing Company at http://www.boeing.com

By Mary Lee

Factory orders fell for the first time in three months in August, mainly due to a plunge in commercial airplane orders, a government report said Thursday.

New orders for manufactured goods in August dropped 10.1 percent, a steeper decline than the 9.5 percent economists expected, according to Bloomberg L.P. New orders rose 10.5 percent in July.

Omitting the volatile transportation sector, new orders decreased by a much smaller 0.1 percent, according to the U.S. Commerce Department. Factory shipments excluding transportation dipped 0.3 percent in August.

Orders for manufactured durable goods, or items designed to last at least three years, dove 18.4 percent in August, with transportation equipment orders tumbling 42.2 percent. Large purchases such as aircraft orders can skew the numbers month to month.

However, economists overlook aircraft volatility and expect investment in factory goods to continue at a healthy pace in the third quarter.

“It now looks like business investment in equipment is growing at about a 14 percent annual rate in Q3 and real GDP grew at roughly a 3 percent rate,” said Brian Wesbury, chief economist at First Trust Advisors L.P. in a Sept. 25 blog post when initial durable goods orders for August were released.

Real GDP, the broadest measure of the economy, rose 4.6 percent in the second quarter, according to the U.S. Commerce Department.

Chart created by Mary Lee
Chart created by Mary Lee

Demand for primary metals such as steel and aluminum declined 1.3 percent, while orders for machinery increased 0.9 percent. Demand for construction equipment orders increased 5.7 percent. Also, orders for mining, oil field and gas field machinery reflected encouraging signs for U.S. business spending with orders surging 16.2 percent.

Orders for nondurable goods like food, medicine and other consumables fell a modest 0.4 percent in August after a decline of 0.8 percent in July.

Computers and electronic products orders increased 1.5 percent, and the demand for electrical equipment and appliances also climbed 2 percent. Orders for defense communication equipment jumped 33.9 percent, reflecting renewed engagement in the Middle East, according to economists.