Factory orders plunge 3.3 percent in October

WASHINGTON – Factory business turned in its weakest performance in three months in October as a big drop in demand for transportation equipment and electronics helped depress orders to American manufacturers.

The Commerce Department reported Tuesday that factory orders fell 3.3 percent to a seasonally adjusted $373.9 billion, the latest evidence that the slowing economy is suppressing businesses’ and consumers’ appetite for manufactured goods.

October’s decline – larger than many analysts expected – marked the first and biggest drop since factory orders plunged by a record 8.1 percent in July.

“The economy will finish the year 2000 not with a bang but with a whimper,” predicted National Association of Manufacturers President Jerry Jasinowski.

“While it is far too premature to be using the ‘R’ word – recession – there’s no question that the vibrant noninflationary growth we’ve been enjoying for the past several years is cooling sharply in the fourth quarter,” he added.

Manufacturers are feeling the pinch of the Fed’s six interest-rate increases since June 1999, which raise borrowing costs and dampen demand for big-ticket items.

In addition, manufacturers are experiencing the effects of a strong dollar, which makes U.S. goods more expensive to buy in overseas markets.

In another report, the Federal Reserve said industrial production grew more slowly in the third quarter than previously thought.

According to revised figures, output at the nation’s factories, mines and utilities rose by 3.5 percent in the July-September quarter, down from the previous estimate of 3.7 percent.

Meanwhile, orders for transportation equipment in October plummeted 16.1 percent, mostly due to weaker demand for airplanes and aircraft parts.

Excluding the volatile transportation category, factory orders fell by 1.2 percent in October, the second decline in the last four months. The transportation sector swings widely from month to month because it includes costly items such as airplanes and ships.

Orders for electronic and electrical equipment, including household appliances and communications equipment, went down by 9.9 percent.

Primary metals, the category that includes steel, saw orders fall by 2.7 percent in October, the largest decrease since January 1999.

Industrial machinery orders, including those for computers and machine tools, however, rose 1.1 percent.

Shipments, a barometer of current production, fell 0.6 percent with transportation products, including airplanes and cars, posting the largest decrease.

Total factory orders rose 1.1 percent in September, according to revised figures, slightly weaker than the government previously reported.