U.S. factory orders fall for second straight month

Reuters News
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Posted: Nov 03, 2015 10:03 AM

By Lucia Mutikani

WASHINGTON (Reuters) - New orders for U.S. factory goods fell for a second straight month in September as the manufacturing sector continues to struggle under the weight of a strong dollar and deep spending cuts by energy companies.

Motor vehicle production, however, remains a bright spot as orders surged in September. That trend is likely to continue, with early reports on Tuesday showing auto sales on track for another strong month in October.

The Commerce Department said new orders for manufactured goods declined 1.0 percent after a downwardly revised 2.1 percent drop in August.

Factory activity, which accounts for about 12 percent of the economy, is also being constrained by efforts by businesses to reduce an inventory overhang and tepid global demand. But the worst could be over for the sector after a report on Monday showed new orders rose in October for the first time since July.

U.S. financial markets were little moved by the report.

Factory orders were previously reported to have declined 1.7 percent in August. The dollar has gained 16.8 percent against the currencies of the United States' main trading partners since June 2014, which has undercut export growth and weighed on the profits of multinationals.

Orders for transportation equipment fell 3.1 percent in September, largely reflecting a drop in aircraft orders. Orders for automobiles and parts rose 1.5 percent in September.

The Commerce Department also said orders for non-defense

capital goods excluding aircraft - seen as a measure of business

confidence and spending plans – slipped 0.1 percent instead of

the 0.3 percent drop reported last month. This also supports the view that the worst of the manufacturing slump might be over.

Shipments of these so-called core capital goods, which are

used to calculate business equipment spending in the gross

domestic product report, increased 0.5 percent in September as reported last month.

Inventories of factory goods fell 0.4 percent after a similar drop in August, also an encouraging sign for the sector. That left the inventories-to-shipments ratio unchanged at a still lofty 1.35.

Manufacturers reported on Monday a decrease in the share of customers who believed inventories were too high, and a fall in the stock of unsold goods at factories in October.

Unfilled orders at factories fell for a second straight month in September, Tuesday's report showed.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)