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US factory orders drop 2.4 percent but investment up

Photo: AP

By MARTIN CRUTSINGER
January 06, 2017 10:56 AM

WASHINGTON (AP) — Orders to U.S. factories fell for the first time in five months in November, but much of the weakness reflected a swing in the volatile category of commercial aircraft. A key category that tracks business investment spending posted an increase.

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Factory orders dropped 2.4 percent after a 2.8 percent rise in October, the Commerce Department reported Friday. It was the first decline since June but the weakness was led by a 73.8 percent plunge in demand for commercial aircraft following a 94.5 percent surge in October.

A key category that serves as a proxy for business investment spending increased 0.9 percent after a 0.5 percent rise in October. This category has lagged for much of this year as a result of big cutbacks in the oil and gas industry.

Orders for durable goods, items expected to last at least three years, fell 4.5 percent, only a slight revision from a preliminary report showing a drop of 4.6 percent. Orders for nondurable goods such as chemicals, paper and clothing, were down 0.2 percent following a 0.6 percent increase in October.

The 0.9 percent increase in business investment, while still modest, was the third best showing this year, and it marked the first back-to-back gains since July and August.

The increases could be a sign that businesses are beginning to invest again after more than a year of cutbacks that have weighed on the economy. Through the first 11 months of 2016, business investment is down 3.8 percent compared to 2015. The big drop in oil and gas prices earlier in 2016 has been a key culprit, trigging cutbacks in orders by drilling companies for steel pipe and drilling equipment.

Manufacturers have also struggled with a stronger dollar and weak economies overseas, which have harmed exports. The dollar's rise in value makes exports more expensive and imports cheaper.

Credits

By MARTIN CRUTSINGER

Copyright 2017 The Associated Press. All rights reserved.

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