Factory orders down in United States for first time in 4 months

Leigh Strope

Monday, Oct. 4, 2004 | 9:18 a.m.

WASHINGTON -- Orders placed with U.S. factories fell for the first time in four months, the Commerce Department said today, with demand dropping sharply for commercial airplanes and parts.

Factory orders declined by 0.1 percent in August, following an increase of 1.7 percent in July. August's drop was the first since April, when orders declined by 1.1 percent.

Orders for durable goods -- costly manufactured items expected to last at least three years -- fell by 0.3 percent. That followed a 1.9 percent increase the previous month.

The outlook for manufacturing brightened when orders for transportation equipment were excluded from the data, with demand for non-transportation goods rising by 1.3 percent. That marked the biggest increase since March.

For nondurable goods, which includes food and clothing, orders rose by 0.2 percent.

Citing signs of some economic improvements, the Federal Reserve last month boosted short-term interest rates for a third time this year. That pushed up a key rate to 1.75 percent, still low by historical standards. The Fed wants to make sure that inflation doesn't become a problem for the economy.

The health of the economy and the availability of jobs are frequent sparring issues on the presidential campaign trail. President Bush says his tax cuts have helped the economy rebound and have spurred job creation. His Democratic opponent, John Kerry, says the tax cuts have benefited mainly the wealthy, squeezed the middle class and plunged the government's balance sheets deeper into red ink.

Although growth in the nation's payrolls picked up in August, the economy is still down 913,000 jobs since Bush took office in January 2001. New jobs figures are released Friday.

In today's report, overall factory orders in August were weighed down by a 42.9 percent drop in demand for commercial aircraft and parts. Defense communications equipment also posted a steep decline of 27.8 percent.

Those declines masked gains elsewhere, including in such categories as household appliances and lighting equipment, construction machinery, non-defense communications equipment, electronic components and power transmission equipment.

Despite a summer slowdown, analysts say the economy continues to grow. Consumer spending has dropped off over concerns about high energy prices, violence in Iraq, terrorism fears and a sluggish jobs market. But business spending continues to rise, and will be counted on to charge the economy the rest of the year.