U.S. Factory Orders Post Big 4.1% Gain : Defense Spending Boosts November Total to 2-Year High

Orders to U.S. factories for manufactured goods soared 4.1% in November, the biggest increase in two years, the government reported today. But without a big rise in demand for defense equipment, the pickup was much slower.

The Commerce Department said orders totaled $200.42 billion in November as a huge 107.9% rise in defense equipment orders boosted overall demand.

The overall increase, which followed a 3.5% decline in October, was the best monthly performance since a 4.4% rise in November, 1984.

Without the big jump in the volatile defense category, factory orders would have risen a much smaller 1.1% after a 1.6% October decline and a 3.3% September rise in the civilian category.

Construction Declines

In a second report, the Commerce Department said construction spending fell 0.7% in November to a seasonally adjusted annual rate of $377 billion. The November decline followed a 0.8% October drop, with the two consecutive setbacks providing further evidence that construction spending is weakening after posting big gains earlier in the year.

In the report on factory orders, the government said that the 107.9% rise in defense orders was the biggest in more than 12 years, since a 140.2% jump in August, 1974.

The strength came from heavy demand for military aircraft and pushed military orders to $10.4 billion, the highest monthly total since March. Defense orders had fallen 43.4% in October.

The key category of nondefense capital goods showed a 6.4% rise in November, erasing a 4.6% October drop.

Rush at End of 1986

Analysts have said that business spending to expand and modernize production facilities is likely to spurt upward through December because of a rush by U.S. firms to take delivery on capital equipment before the new tax law took effect on Jan. 1.

The department said two-thirds of the $7.9-billion increase in orders occurred in the durable goods sector, which rose by 5.5% in November. In an advance report 10 days ago, the government had put the increase in durable goods, items expected to last three or more years, at a slightly higher 5.9%.

Within the major industry categories, orders for transportation equipment rose 15.9%. But without a big increase in defense orders, demand in the transportation category would have fallen 6.3%.

Orders in the machinery category, which includes computers, fell 1.2%.