January 4, 2012 / 12:40 AM / 8 years ago

November factory orders rise, business spending ebbs

WASHINGTON (Reuters) - New orders for factory goods rose solidly in November, but business spending on capital goods is cooling, a government report showed on Wednesday.

A 2012 Volkswagen Passat is worked on by a automotive robot at the Chattanooga, Tennessee manufacturing plant, December 1, 2011. REUTERS/Billy Weeks

The Commerce Department said orders for manufactured goods increased 1.8 percent, snapping two consecutive months of declines, as demand for transportation equipment surged.

It was the largest rise since July.

October’s orders were revised to show a smaller 0.2 percent fall, which was initially reported as a 0.4 percent drop. Economists had expected orders to increase 1.7 percent in November.

Orders excluding transportation rose 0.3 percent in November after advancing 0.4 percent the prior month.

Orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - fell 1.2 percent after declining 0.9 percent in October.

The closely tracked shipments for this category fell 0.8 percent after dropping 0.9 percent in October, indicating businesses’ appetite for capital spending may be waning. November marked the third straight month of declines.

Business spending had risen sharply since the end of the 2007-09 recession and was one of the drivers of the recovery from the longest downturn since the 1930s.

Unfilled orders of non-defense capital goods rose 0.9 percent after increasing 1.0 percent in October.

Data on Tuesday showed manufacturing activity grew at its fastest pace in six months in December, but slowing global growth could take some edge of U.S. factories this year.

The Commerce Department report showed orders for transportation equipment jumped 14.7 percent in November as demand for civilian aircraft soared 73.9 percent.

Orders for motor vehicles increased 0.9 percent, adding to October’s 1.3 percent gain.

Outside transportation, details of the report were mixed, with strong demand for primary metals and furniture, and decent growth in orders for machinery.

Orders for computers and electronic products fell. There was also weak demand for electrical equipment and appliances.

In a sign of strength in the manufacturing sector, overall shipments of new orders rose for a sixth consecutive month in November and unfilled orders increased 1.3 percent after rising 0.4 percent in October.

Inventories at U.S. factories remained lean, rising 0.5 percent after increasing 0.9 percent in October. The careful management of inventories bodes well for continued production.

The department also said orders for durable goods -manufactured products expected to last three years or more -increased 3.7 percent instead of the 3.8 percent jump reported last month.

The increase in durable goods orders excluding transportation was unrevised at 0.3 percent.

Other data on Wednesday showed the troubled U.S. housing market closed out the year on a soft note. Demand for loans to buy homes and refinance mortgages slid in the final week of 2011, even as mortgage rates dipped, a report from the Mortgage Bankers Association showed.

Reporting By Lucia Mutikani; Additional reporting by Lynn Adler in New York; Editing by Andrea Ricci

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