Factory orders fall for sixth month

March 5, 2009 7:54:38 AM PST
Orders to U.S. factories fell for a record sixth straight month in January as demand declined across a wide cross-section of industries. The Commerce Department said Thursday that demand for manufactured products dropped by 1.9 percent in January. That was smaller than the 3.5 percent drop that economists had been forecasting but it was still the sixth consecutive monthly fall, a record number of declines for a data series that goes back to 1992.

The weakness in January included a big plunge in orders for transportation equipment, reflecting the continued troubles facing automakers who are struggling with the weakest sales in decades.

Orders for autos and auto parts dropped by 1.7 percent after an even bigger 5.6 percent fall in December. Orders for ships plunged 85.5 percent but orders for commercial aircraft rose sharply after two months of big declines.

Excluding transportation, factory orders would have fallen by 0.9 perent, very close to the 1 percent drop that had been forecast.

Orders for durable goods, items ranging from aircraft to refrigerators, dropped by 4.5 percent in January, slightly less severe than the 5.2 percent decline the government has reported last week in an advance look at the data.

Orders for non-durable goods, items ranging from food to chemicals, edged up a 0.5 percent in January after sizable declines in earlier months. The increase primarily reflected higher prices for petreleum products such as gasoline rather than any real strength in this sector.

Manufacturers have been battered by the current recession, already the longest in a quarter century, as they have seen demand shrink both in the United States and in their major overseas markets, which are also struggling with severe downturns.

The Federal Reserve's latest look at business conditions around the country reported on Wednesday that manufacturing was suffering major declines across all regions of the country with manufacuters of capital goods and construction-related equipment especially hard hit.

For January, the Commerce Department report showed that orders were down sharply for primary metals such as steel, heavy machinery including turbines and generators and for computers.

The government reported last week that the overall economy, as measured by the gross domestic product, shrank at an annual rate of 6.2 percent in the final three months of last year, the biggest quarterly drop in a quarter century and much worse than the 3.2 percent decline originally reported. It was one of the starkest signs yet of the severity of the current recession, which began in December 2007 and has already lasted longer than any downturn in a quarter-century.

Many manufacturers have been trimming production and payrolls in a struggle for survival. The problems have been felt most acutely by factories linked to the housing market, which has been in a severe slump for more than two years, and by U.S. automakers.

Home builder Toll Brothers Inc. reported Wednesday that its loss for the quarter ending in January was $89 million, or 55 cents per share, compared with a year-ago loss of $96 million, or 61 cents per share.

Auto companies reported another dismal sales month as sales hover near historic lows. February sales plunged 41 percent compared with the same month last year despite offers of huge rebates and tempting low-interest loans.

Sales at General Motors Corp. dropped 52 percent, while Ford Motor Co. reported a 48 percent decline and Chrysler LLC saw its sales drop 44 percent.

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