US factory orders up slight 0.3 per cent in September

WASHINGTON – Orders to U.S. factories increased a modest amount in September even though a key category that tracks business investment plans fell by the largest amount since February.

Factory orders edged up a slight 0.3 per cent in September following a 0.4 per cent advance in August, the Commerce Department reported Thursday. Orders in a category that serves as a proxy for business investment fell 1.3 per cent, reversing a 1.2 per cent increase in August. It was the biggest decline in the investment category since a 2.1 per cent plunge in February.

The hope is that manufacturers, who have been battered all year by a strong dollar and global weakness, will begin to see an improvement. Analysts think that the September drop in the investment category, non-defence capital goods orders excluding aircraft, will be temporary.

Orders for durable goods, items expected to last at least three years, fell by 0.3 per cent in September, slightly worse than the 0.1 per cent decline estimated last week in an advance report. Demand for non-durable goods, items such as chemicals and paper, increased 0.9 per cent after a 0.5 per cent rise in August.

The weakness in durable goods reflected in part a big drop in demand for military aircraft, which fell 47.6 per cent. Demand for commercial aircraft rose 12.1 per cent.

Orders for machinery were up 1.1 per cent in September while demand for computers fell 4.7 per cent.

In addition to the strong dollar, which makes U.S. exports more expensive on overseas markets, U.S. manufacturers have had to contend this year with sharp cutbacks in investment spending by energy companies in the face of big declines in global oil prices.

But there are signs that the energy cutbacks are coming to an end. Orders for mining and oil field equipment rose 12.6 per cent in September after gains of 5.7 per cent in August and 48.4 per cent in July. Even with the recent gains, spending in this category is down 54.9 per cent this year compared to the same period in 2015.

On Tuesday, the Institute for Supply Management reported that its closely watched manufacturing index rose to 51.9 in October, up from 51.5 in September. Anything above 50 signals growth in manufacturing. Analysts saw that gain as evidence that manufacturing is starting to rebound after a weak showing in the first half of the year.