US factory orders rise in Oct., ending streak of declines

AP News
|
Posted: Dec 03, 2015 10:22 AM
US factory orders rise in Oct., ending streak of declines

WASHINGTON (AP) — U.S. factory orders rebounded in October after two prior monthly declines, helped by rising demand for aircraft, computers and machinery.

THE NUMBERS: Factory orders rose 1.5 percent in October, the Commerce Department said Thursday. This follows monthly declines of -0.8 percent in September and -2.1 percent in August.

Factory orders have tumbled 7.1 percent year-to-date.

KEY DRIVERS: Manufacturers have struggled to adjust to a stronger dollar hurting exports, lower oil prices and weak global economic growth. But they were helped in October as orders in the volatile aircraft category climbed 81 percent. Orders for computers and electronics advanced 1.9 percent. Machinery orders improved 1.2 percent.

A separate category that serves as a proxy for business investment spending — and excludes aircraft and defense orders — improved 1.3 percent.

Much of the broader drag on the industrial sector this year reflects lower oil prices.

Through October, the value of shipments from oil refineries have plunged 33.4 percent compared to the same period in 2014.

BIG PICTURE: U.S. manufacturing has lost much of its heft this year, as factories face less demand abroad for their products. China's economic growth has slowed. Europe is struggling financially. And Japan has slid into recession.

The stronger dollar causes U.S. goods to be more expensive overseas, which has eroded exports. The lower oil prices have led energy firms to slash orders for pipeline and equipment. Demand for autos and long-lasting consumer goods have not been strong enough to fully offset these headwinds for manufacturers.

THE TAKEAWAY: Despite the increase in orders, some manufacturers are pessimistic.

A separate measure found that U.S. factory activity plunged in November to the lowest level in more than six years.

The Institute for Supply Management said Tuesday that its index of factory activity in November dropped to 48.6 from 50.1 in October. Any reading below 50 signals contraction.