Factory orders decline in October
4.4% drop biggest in 15 months as aircraft demand wanes
WASHINGTON — Orders to U.S. factories for bigticket manufactured goods fell in October by the largest amount in 15 months, the Commerce Department reported Wednesday.
The Commerce Department said orders for durable goods dropped 4.4 percent last month, led by a huge decline in the volatile areas of commercial and military aircraft.
The slowdown has raised the specter that a widening trade war between the United States and China is causing U.S. companies to grow more cautious about committing resources to expand and modernize their operations.
Ben Herzon, executive director of Macroeconomic Advisers, said the number of risks to manufacturing was growing. He cited a stronger dollar, which makes American goods less competitive on global markets, as well as worries about the U.S.-China trade battle.
“While the manufacturing sector is currently in good shape, headwinds are mounting,” Herzon said. “We expect strong momentum in the economy to overcome these headwinds and keep manufacturing on a firming trend, but we are watching developments closely for signs that this calculus could change.”
The figures contrast with comments Tuesday by White House economic adviser Larry Kudlow, who said business equipment was booming again after a slower third quarter. Previously released
data showed that business equipment investment rose during the period at the slowest pace in two years.
The overall economy, as measured by the gross domestic product, grew at a 3.5 percent annual rate in the July-September quarter. But that gain came despite the fact that business-investment spending slowed sharply in the third quarter, to an annual growth rate of 0.8 percent, after an 8.7 percent surge in the second quarter.
Economists said the investment slowdown could also be an indication that the boost to investment spending stemming from the tax-cut legislation President Donald Trump pushed through Congress last year is beginning to wane.
The report on durable goods, items expected to last at least three years, showed that October’s drop was the biggest setback since a 7.4 percent fall in July 2017.
In transportation, orders were down 12.2 percent, with demand for autos and auto parts edging up 0.2 percent. Orders for commercial aircraft fell 21.4 percent, and orders for military aircraft dropped 59.3 percent.
Excluding transportation equipment demand, which is volatile, durable-goods orders rose 0.1 percent in October, below projections, after a 0.6 percent decline in September that was worse than previously reported figures.
Electrical equipment, appliances and components had the largest increase in orders in two years. Defense capital-goods orders fell 16.6 percent after a 16.3 percent decline in September. Previously released data showed that over the second and third quarters, federal defense spending rose at the fastest pace since 2009.
Orders for primary metals such as steel dropped 2.3 percent while demand for computers and related products rose 1 percent.
Durable-goods inventories were unchanged in October after a 0.8 percent increase the month before.
In a separate economic report, the Labor Department said that new applications for unemployment benefits rose for a second consecutive week, up by 3,000 to a stilllow 224,000. Benefit applications, which are an indicator for layoffs, have been at ultralow levels for an extended period, reflecting the fact that the nation’s unemployment rate has fallen to the lowest level in nearly five decades. Information for this article was contributed by Martin Crutsinger of The Associated Press and by Shobhana Chandra of Bloomberg News.