U.S. factory orders fall sharply, order books shrinking

Tue Feb 3, 2015 4:30pm EST
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By Lucia Mutikani

WASHINGTON (Reuters) - New orders for U.S. factory goods fell for a fifth straight month in December, but a smaller-than-previously reported drop in business spending plans supported views of a rebound in the months ahead.

Other data on Tuesday showing fairly brisk sales in January by the country's leading automobile manufactures also offered a silver lining for a sector that has taken a hit from weak global demand and falling crude oil prices.

"It suggests that activity will pick up in coming months," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

The Commerce Department said new orders for manufactured goods declined 3.4 percent as demand fell across a broad sector of industries. That followed a 1.7 percent decrease in November and exceeded economists expectations for a 2.2 percent drop.

The department also said orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - slipped only 0.1 percent instead of the 0.6 percent drop reported last month.

Manufacturing is being constrained by weakening demand in Europe and Asia, as well as a strong dollar and falling crude oil prices, which have caused some companies in the energy sector to either delay or cut back on capital expenditure projects.

An ongoing labor dispute at the nation's West Coast ports, which has caused shipment delays, is also hurting activity.

Business spending on equipment in the fourth quarter was the weakest since mid-2009, helping to hold back the economy to a 2.6 percent annual growth pace.   Continued...

The aluminium cab of an all-new Ford 2015 F-150 pickup truck is seen on the new robot assembly line at the Ford Rouge Center in Dearborn, Michigan, November 11, 2014. REUTERS/Rebecca Cook