Drop in defense aircraft cuts November factory orders; many categories post gains

Tuesday, January 8th 2002, 12:00 am
By: News On 6

WASHINGTON (AP) _ Orders to U.S. factories fell by 3.3 percent in November with virtually all the weakness coming from a huge drop in demand for military airplanes.

The Commerce Department report Tuesday showed that a wide range of other manufactured goods _ including metals, machinery, cars, computers and household appliances _ posted gains.

Even though November's 3.3 percent decline came after factory orders rocketed by 7 percent in October, the latest snapshot of manufacturing was consistent with a host of other recent economic reports suggesting the worst of the recession may be over.

Last week, a rise in new orders to factories helped push a key gauge of manufacturing activity higher in December, suggesting the sector is beginning to emerge from a 17-month slump, the Institute for Supply Management reported.

On Wall Street, stocks were mixed. The Dow Jones industrial average was down 32 points while the Nasdaq gained 10 in morning trading.

To cope with the sour economy, manufacturers have sharply cut production, trimmed hours and let workers go. The sector shed 1.3 million jobs last year, or about 7 percent of its work force.

To revive the economy, the Federal Reserve cut interest rates 11 times in 2001 and many analysts expect that will set the stage for a rebound in the first half of this year.

The decline in overall orders to U.S. factories in November stemmed from a whopping 82.4 percent drop in new orders for defense aircraft and parts. The month before, orders for this category zoomed up by 491.6 percent.

The drop in orders for defense airplanes pushed down orders for the entire transportation category, which also includes commercial aircraft, cars and ships, by 17.3 percent in November, after a 39 percent rise in October. However, orders for cars rose 5.2 percent and commercial airplanes and parts posted a 17.2 percent gain in November.

Excluding transportation equipment, factory orders edged down by 0.2 percent in November, the second decline in the last three months.

Orders for machinery rose 2.5 percent in November, after slipping by 0.4 percent. Computers and electronics products saw orders rise by 1.8 percent, following a 8.9 percent advance. Orders for household appliances were up 6.2 percent in November on top of a 5.1 percent gain. Furniture orders rose by 4.8 percent, following a 3.2 percent rise.

Orders for primary metals, including steel, increased 1.7 percent in November, after falling by 2.1 percent.

The manufacturing sector has been hardest hit by the slumping economy which fell into recession in March. Despite recent encouraging reports, analysts say it will take a while for the sector to turn around.

Consumer confidence rebounded in December but the nation's unemployment rate climbed to 5.8 percent during the month and analysts expect the jobless rate to peak at around 6.5 percent in June or July, stabilize briefly and start falling by the fall or winter.

Economists say businesses will keep a close eye on the behavior of consumers, the lifeblood of the economy, before boosting production.