Factory orders rise, but business investment slips

[January 05, 2012]  WASHINGTON (AP) -- Orders for factory-made goods that signal business investment plans fell for a second straight month, part of a mixed report on manufacturing in November.

Overall factory orders rose 1.8 percent, the Commerce Department said Wednesday. The largest increase since July was chiefly because of a surge in airplane orders, which can be volatile from month to month.

Demand for so-called core capital goods, such as computers and electronic equipment, declined 1.2 percent after a similar drop in October. Economists pay closer attention to this category because it can be a good indication of business investment, which drives economic growth.

Still, the decline may be temporary. A private survey showed earlier this week that U.S. factories ended the year with their best month of growth since late spring.

Factories hired more workers last month, saw the most growth in new orders since April and ramped up production, the Institute for Supply Management said Tuesday.

John Ryding and Conrad DeQuadros, analysts for RDQ Economics, said they are more likely to overlook the weak report on factory orders after seeing the more positive ISM survey.

"This report for November activity feels like somewhat old news since the state of manufacturing in December has already been indicated in yesterday's ISM report and it appears from that survey that manufacturing growth is picking up," the economists wrote in a note to clients.

A bigger issue for U.S. factories may be Europe's debt crisis. Many economists believe that Europe, a major market for American goods, has already slipped into a recession.

Economists also expect that economic growth in Asia will slow in coming months.

Both could weaken demand for U.S. goods and slow economic growth.

The government report on factory orders also showed:

• Demand for durable goods, items expected to last at least three years, rose 3.7 percent, reflecting gains in demand for airplanes, autos, primary metals such as steel and industrial machinery.

• Demand for nondurable goods edged up 0.3 percent as demand increased for petroleum, chemical products and clothing. The rise in durable goods was revised down slightly from a 3.8 percent preliminary estimate made two weeks ago.

• Demand for transportation products increased 14.7 percent, propelled by the 14.7 percent surge in orders for commercial aircraft.

• Orders for motor vehicles and parts rose 0.9 percent. Automakers are closing out a solid year in which easier credit and pent-up demand are helping boost sales. The industry is recovering from the 2007-2009 recession, when sales fell to the lowest level in decades.

[Associated Press; By MARTIN CRUTSINGER]

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