Orders to U.S. factories plunge 5.9 percent in September

Friday, October 25th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ Orders to U.S. factories for big-ticket durable goods plunged 5.9 percent in September, the biggest decline in 10 months, the government reported Friday, providing further evidence that the economy is struggling to mount a sustainable recovery from last year's recession.

The Commerce Department said that the drop in demand for durable goods, manufactured products expected to last three or more years, was the third decline in the past four months and reflected widespread weakness throughout American manufacturing with orders down for everything from cars to communications equipment.

The drop in orders was much sharper than the 2 percent decline that many economists had been expecting.

With less than two weeks before Americans are scheduled to go to the polls to decide which party will control Congress, Democrats have gone on the attack, hoping to use the uncertain economic recovery to their advantage against Republicans in close House and Senate races.

House Democratic Leader Richard Gephardt, D-Mo., said on Thursday that ``the economy is stuck in neutral if not falling, and we could be headed for a double-dip recession.''

President Bush, who has kept attention throughout much of the campaign season on a possible war with Iraq, has been on the campaign trail this week, defending the way his administration has dealt with the country's first recession in a decade and promising to do more if necessary to keep the economy out of another recession.

The report on durable goods followed news this week that the Index of Leading Economic Indicators fell for the fourth straight month, something that hasn't happened since a similar string of declines before the 1990-91 recession, which contributed to the defeat of Bush's father.

The economy is being held back by a number of factors including a plunging stock market and rising consumer anxiety, fed by concerns over what a possible war in Iraq will do to energy prices.

The 5.9 percent drop in orders for durable goods in September followed a 0.6 percent decline in August and a 4.5 percent drop in June. Only July posted an increase during this period, a gain of 8.5 percent.

American manufacturers have been the hardest hit by the recession, with employment in this sector dropping for more than two years as companies have been forced to lay off more than 1 million workers in the face of falling demand.

The Federal Reserve reported in its latest nationwide survey of business conditions on Wednesday that manufacturing activity had weakened over the past two months. Many economists believe the Fed will cut interest rates when they meet again on Nov. 6.

The Fed has kept a key interest rate at a 40-year low of 1.75 percent since last December, hoping that cheap money will spur demand for items such as homes and cars.

Those two sectors have been doing well for most of this year but analysts are worried that other parts of the economy need to start doing better to take up the slack when consumer demand for cars and homes starts to flag.

The orders report showed that orders for cars, trucks and other transportation products dropped by 16.1 percent. Excluding this volatile sector, orders were still down by 1 percent.

Weakness in other industries included a big 52 percent decline in demand for communications equipment, a sector that has suffered from the collapse of the Internet stock market bubble.

Orders for non-defense capital goods dropped by 12.6 percent, a bad sign for hopes that this key sector of the economy is about to stage a rebound, while orders for defense equipment, which have been strong reflecting the government's big buildup in this area, fell by 4.1 percent.