Factory Orders Decline a Sharp 3.6% in October
U.S. factory orders plummeted 3.6% in October, the sharpest decline in more than six years, the government said Thursday in a report that prompted economists to express new fears about a possible recession.
The Commerce Department said orders for manufactured goods, after adjusting for seasonal factors, totaled $192.3 billion in October, $7.1 billion below their level in September.
The drop was led by a 42% plunge in orders for military equipment, which totaled $5.1 billion last month, reflecting decreases in demand for aircraft and parts.
The September figure, which had represented a 3.4% rise, had raised hopes among some economists that the American manufacturing sector might be staging a rebound after being battered for two years by foreign competition.
Recession Possible, Analysts Say
However, analysts said the big October drop showed that domestic producers have yet to see improvement in their trade difficulties. Some analysts expressed fear that the continued weakness in manufacturing, coupled with declines in consumer purchasing, may be enough to push the country into a recession next year.
Jay Levy, head of an economic consulting firm in Chappaqua, N.Y., said he was one of those in the minority who is forecasting that the four-year economic recovery will end in 1987.
“These factory orders are telling us that we are getting deeper into a phase of sluggish growth,” he said. “We think the chances of a recession beginning next year are about two to one. Only a very marked improvement in the trade balance could avert a recession.”
Beryl Sprinkel, President Reagan’s chief economist, predicted Wednesday that the huge trade deficit will shrink by between $25 billion and $40 billion from this year’s expected record $170-billion imbalance. He said the Administration was holding firm to its belief that the economy will show greater strength next year.
Roger Brinner, economist with Data Resources Inc., rated the chances of a recession next year as one in three. “If you don’t get the trade turnaround, then you do get a recession, but we think trade will improve,” he said.
Brinner forecast the economy, as measured by the gross national product, would grow at a sluggish rate of 2.5% for the first half of 1987, the same level as in the past two years, and then pick up slightly to a 3.5% rate in the latter half of the year.
The 3.6% drop in factory orders in October was the biggest one-month decline since a 4.5% plunge in May, 1980.
