Saturday 1 November 2014
 
»
 
»
GROWTH ENGINE STALLING

US manufacturing orders drop sharply

Washington, September 28, 2012

 

Orders for long-lasting US manufactured goods dropped sharply in August suggesting the main engine of economic growth was stalling, offsetting hopeful signs of an improvement in the labour market.
 
The Commerce Department said durable goods orders dived 13.2 percent, the largest drop since January 2009, when the economy was in the throes of a recession. That primarily reflected weak aircraft and automobiles demand, although orders for a wide range of goods also fell.
 
Economists polled by Reuters had expected orders for durable goods -- items from toasters to aircraft that are meant to last at least three years -- to fall 5 percent.
 
The sharp drop underscored the weakness in the economy, whose growth pace in the second-quarter was cut down to a 1.3 percent annual pace from 1.7 percent, mainly because of a drought in the Midwest, and dimmed hopes of a pick-up in activity.
 
"It just shows the manufacturing side of the economy continues to labor here, and in fact, contract. Orders are so critical to what is ahead," said Tim Ghriskey, chief investment officer at Solaris Group in Bedford Hills, New York.
 
A separate report from the Labor Department showed the number of Americans filing new claims for jobless benefits fell 26,000 last week to a two-month low of 359,000. The four-week moving average for new claims, a better measure of labor market trends fel l for the first time after five weeks of increases.
 
The labor market has been mired in weakness as worries about higher taxes and deep government spending cuts in January, the ongoing debt problems in Europe and slowing global growth lead employers to be cautious about ramping up hiring.
 
Sluggish job gains and stubbornly high unemployment spurred the Federal Reserve this month into launching a third round of bond purchases to drive down already low interest rates.
 
The US central bank vowed to buy $40 billion worth of mortgage-backed securities each month until it sees a sustained upturn in the labor market.
 
But the good news on the labor market was eclipsed by the weak durable goods report. Though non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, halted two straight months of hefty declines, that was not much of a silver lining.
 
Shipments of these goods, which are used to calculate equipment and software spending in the gross domestic product report, fell for a second straight in month in August. The weakness suggested third-quarter economic growth would probably not improve much from the April-June's anemic pace.
 
Manufacturing, which has been the main driver of the recovery from the 2007-09 recession, has been hit by turbulence from sluggish domestic and global demand.
 
Fears that the US Congress could fail to avert a "fiscal cliff" -- the $500 billion or so in expiring tax cuts and government spending reductions set to take hold in 2013 -- have also left businesses with little incentive to boost production.
 
Boeing received only one aircraft order in August, down from 260 in July, accounting for the bulk of the decline in durable goods orders. Demand for motor vehicles also fizzled.
 
Transportation equipment tumbled 34.9 percent after racing ahead 13.1 percent in July. Excluding transportation, orders fell 1.6 percent after dropping 1.3 percent the prior month. Economists had expected this category to rise 0.3 percent after a previously reported 0.6 percent fall. - <!--Reuters-->
 



Tags: US | growth | manufacturing |

More INTERNATIONAL NEWS Stories

calendarCalendar of Events

Ads