Another Drop In Factory Orders

Orders to U.S. factories for big-ticket manufactured goods fell in October for the second-straight month, hit by the biggest drop in demand for electronic and electrical equipment in more than two years.

The Commerce Department reported Tuesday that orders for durable goods - items expected to last at least three years - declined by 1.3 percent last month to a seasonally adjusted $200.9 billion.

October's performance was worse than many analysts' expectations. They were forecasting orders would rise by 1 percent. It marked the first back-to-back monthly declines since February-March 1998.

In September, durable-goods orders fell by 1.9 percent, an even sharper drop than the government previously estimated one month ago.

Last week, the Federal Reserve raised interest rates for a third time this year in an effort to slow the red-hot economy and keep inflation under control. At the same time, the Fed signaled that it may remain on the sidelines for the rest of the year. Economists believe Fed policy-makers will leave rates unchanged when they meet next month.

Orders for electronic and other electrical equipment including semiconductors, circuit boards, telecommunications equipment and home appliances fell 15.3 percent in October, the worst showing since July 1997.

Demand for such orders led the decline in overall durable-goods orders despite gains in other areas.

Orders for transportation equipment, which fell sharply in September, rose a solid 3.4 percent in October, reflecting stronger demand for airplane and aircraft parts.

Transportation often is volatile from month to month because it includes such big-ticket purchases as airplanes. However, excluding transportation, overall orders for durable goods fell 2.6 percent in October, the largest drop since a 2.7 decline in October 1998.

Orders for industrial machinery, including computers and machine tools, rose a strong 2.8 percent in October, following a 0.4 percent drop the month before.

While on the rebound, American manufacturers have been battered by a global financial crisis, which has cut sharply into their overseas sales and also opened them up to stiffer competition from cheaper imports.

One of the U.S. industries that has suffered the most from the global turmoil has been steel.

Today's report said primary metals, the category that includes steel, saw orders fall by 0.7 percent in October, the third monthly decline in a row.

However, shipments of big-ticket durable goods, a good signal of current demand, rose 0.7 percent in October after falling a sharp 1.9 percent the month before.