BLBG: September Factory Orders in the U.S. Slumped More Than Forecast
By Shobhana Chandra
Nov. 4 (Bloomberg) -- Orders placed with U.S. factories in September dropped three times as much as forecast, led by a slump in the value of bookings for non-durable goods that reflected the plunge in the cost of oil and other commodities.
Demand declined 2.5 percent after a revised 4.3 percent drop in August, the Commerce Department said today in Washington. Orders for non-durables fell 5.5 percent, the most in two years, and bookings for durable goods, those meant to last at least three years, climbed 0.9 percent as aircraft and autos rebounded.
Excluding orders for transportation equipment, which tend to be volatile, bookings fell by the most on record, indicating companies are cutting back as sales here and abroad slump. The worst housing and manufacturing declines in a quarter century threaten to deepen and extend the economic slowdown well into 2009.
``There's not a lot of hope on future orders and production,'' Guy Lebas, chief economist at Janney Montgomery Scott LLC in Philadelphia, said before the report. ``The economy was on the edge of a precipice, and the credit crisis gave it a shove. Manufacturing will weaken because of slowing exports.''
The economy, which contracted in the third quarter by the most since the 2001 recession, has become the central issue for Americans as the presidential election draws to a close today.
Factory orders were forecast to fall 0.8 percent, after a previously reported 4 percent drop the prior month, according to the median estimate of 61 economists surveyed by Bloomberg News. Projections ranged from a decline of 3.4 percent to an increase of 1.2 percent.
Petroleum Drops
The drop in bookings for non-durable goods was the biggest since September 2006. Orders for petroleum and coal products plunged 17 percent. Demand for chemicals decreased 4.2 percent, in part, also reflecting falling commodity costs.
Prices for oil, copper and wheat have dropped by more than half since reaching records this year. Crude oil for December delivery traded at about $65 a barrel yesterday on the New York Mercantile Exchange.
Orders for durable goods, which make up just over half of total factory demand, increased 0.9 percent. Excluding demand for transportation equipment, such as aircraft and autos, orders declined 3.7 percent, the most since records began in 1992.
Civilian aircraft orders increased 30 percent, and those for autos rose 2.7 percent.
Boeing Co., the world's second-biggest commercial-airplane maker, said it got 41 orders for aircraft in September, up from 38 in August. Still, a strike by 27,000 machinists idled the Chicago- based company's factories for eight weeks and cut profit by about $10.3 million a day. Machinists began returning to work on Nov. 2 after accepting a contract with 15 percent raises.
Auto Slump
Auto demand won't hold up. Ford Motor Co., the second-biggest U.S. automaker, yesterday said its U.S. sales fell 30 percent in October, and General Motors Corp., its bigger rival, reported a 45 percent plunge.
Factory inventories decreased 0.7 percent, the biggest decline in five years. Still, the drop in demand caused the inventory-to-sales ratio to rise to 1.29 months from 1.26 months in August.
Falling demand is hurting manufacturers such as Cummins Inc., the maker of more than a third of North America's heavy-duty trucks engines, which cut its full-year sales projection.
``The company is experiencing significant declines in some of its consumer markets as the U.S. economy continues to deteriorate,'' Cummins said in a statement on Oct. 31, adding that it faces ``signs of economic weakness in Europe.''
