Weak orders point to sharp slowdown in manufacturing
By Lucia Mutikani
WASHINGTON (Reuters) - Orders for long-lasting U.S. manufactured goods fell sharply in August, suggesting the main engine of the economic recovery was stalling even as a report showing a drop in new claims for jobless aid offered a hopeful sign on the labor market.
While weak demand for aircraft and automobiles accounted for much of the drop in orders last month, the Commerce Department report on Thursday underscored the damage being inflicted by the uncertainty over U.S. fiscal policy, Europe's debt troubles and a slowdown in China.
"Given the uncertainty associated with the fiscal cliff, there is certainly a wait-and-see attitude which is impacting a lot of the data," said Omair Sharif, an economist at RBS in Stamford, Connecticut.
The so-called fiscal cliff refers to the $500 billion or so in expiring tax cuts and government spending reductions set to take hold in 2013 if the U.S. Congress fails to agree on an orderly way to reduce a huge budget deficit.
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. The decline primarily reflected weak demand for aircraft and automobiles, and transportation orders fell 34.9 percent. Plane maker Boeing reported only one aircraft order last month versus 260 in July.
But orders were down for a wide range of goods, and even excluding transportation, orders fell 1.6 percent, dropping for a third consecutive month. The fall was in sync with other data indicating a marked cooling in the production side of the economy.
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, with non-transportation orders rising marginally.
Unfilled orders dropped by the most since December 2009, pointing to weak factory activity in the months ahead. Continued...