U.S. factory orders grew 1.8% in November as business investment fell for the second straight month; core capital goods orders offset by sharp rise in airplane orders

Cindy Allen

Cindy Allen

Jan 4, 2012 – Associated Press

WASHINGTON , January 4, 2012 () – Orders for factory-made goods that signal business investment plans fell for a second straight month, part of a mixed report on manufacturing in November.

The drop in demand for so-called core capital goods was offset by a sharp rise in volatile airplane orders. That lifted overall factory orders 1.8 percent, the Commerce Department said Wednesday.

Core capital goods, such as computers and electronic equipment, are closely watched because they are a good proxy for business investment.

Still, the decline may end up being less of a concern after a private survey showed earlier this week that U.S. factories ended the year with their best month of growth since late spring.

Factories hired more workers last month, saw the most growth in new orders since April and ramped up production, the Institute for Supply Management said Tuesday.

John Ryding and Conrad DeQuadros, economists with RDQ Economics, said economists are more likely to overlook the weak report on factory orders after seeing the ISM survey.

"This report for November activity feels like somewhat old news since the state of manufacturing in December has already been indicated in yesterday's ISM report and it appears from that survey that manufacturing growth is picking up," the economists wrote in a note to clients.

A bigger issue may be the impact that Europe's debt troubles could have on U.S. export growth. Many economists believe that Europe, a major market for American goods, has already slipped into a recession.

In addition to the problems in Europe, economists expect that economic growth in Asia will slow in coming months as well.

Both could weaken U.S. growth.

The government report on factory orders also showed:

Demand for durable goods, items expected to last at least three years, rose 3.7 percent, reflecting gains in demand for airplanes, autos, primary metals such as steel and industrial machinery.

Demand for nondurable goods edged up 0.3 percent as demand increased for petroleum, chemical products and clothing. The rise in durable goods was revised down slightly from a 3.8 percent preliminary estimate made two weeks ago.

Demand for transportation products increased 14.7 percent, propelled by a 14.7 percent surge in orders for commercial aircraft.

Orders for motor vehicles and parts rose 0.9 percent. Automakers are closing out a solid year in which easier credit and pent-up demand are helping boost sales as the industry recovers from the 2007-2009 recession when sales fell to the lowest level in decades.

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