Factory orders unexpectedly fall 0.4 percent in September

Marcy Gordon

Wednesday, Nov. 3, 2004 | 9:12 a.m.

WASHINGTON -- Orders placed with U.S. factories fell for the second consecutive month in September, the first back-to-back decline in two years. Demand dropped sharply for manufactured goods other than defense materials, the Commerce Department reported today.

Overall, factory orders slipped by 0.4 percent, or $1.3 billion, in September to $368.3 billion, following a decrease of 0.3 percent in August that reversed a months-long trend of increases. Economists had expected a 0.5 percent increase.

It was the first back-to-back decline since November and December of 2002 and the first economic indicator to be released after Tuesday's election.

Wall Street shrugged off the report, however. Stocks surged as investors expressed relief following the election and what was widely believed to be a victory for President Bush.

The health of the economy and the availability of jobs were frequent sparring issues during the bitter presidential campaign. Bush insisted that his tax cuts had helped the economy rebound and spurred job creation, while Democratic challenger John Kerry contended the tax reductions had mostly benefited the wealthy while piling up the government deficit.

The latest data provided another piece of evidence "that the nation's manufacturing base is downshifting," said Mark Zandi, the chief economist at Economy.com. "It's still growing but at a slower rate."

Orders for durable goods -- costly manufactured items expected to last at least three years -- rose 0.2 percent in September. Orders for computers and electronic products scored the biggest increase, 9.6 percent, boosted by a jump in demand for military communications equipment as the war in Iraq continued.

That followed a steep decline of 27.8 percent in such equipment in August.

When defense materials are subtracted, new factory orders dropped a full 1 percent in September.

But the outlook for manufacturing brightens when orders for transportation equipment are excluded from the date, with demand for non-transportation goods rising by 0.3 percent.