Factory Orders Fall, Triggering Recession Fears

Orders to U.S. factories for “big ticket” durable goods fell 0.6% in October, the second consecutive monthly decline, the government reported today.

The Commerce Department said orders for durable goods--items expected to last three or more years--dipped to a seasonally adjusted $124.59 billion last month after a 1.1% drop in September.

Although the October decline had been expected, the real surprise was a sharp revision to the orders number for September, which a month ago had been reported as a small increase of 0.2%.

The back-to-back declines in orders provided fresh evidence that the U.S. manufacturing sector is facing a severe slowdown. Many economists are forecasting that the country will dip close to a recession in the coming six months as a slump in manufacturing spills over into the rest of the economy.

Much of the weakness has been in the auto industry, where weak sales have prompted layoffs and production cutbacks.

For October, transportation orders rose by 3% to $33.54 billion, recouping some of a giant 10.8% drop in September.

However, the October strength came from increased demand for military ships and civilian aircraft. Orders for motor vehicles were down again.

The total demand for defense equipment fell by 12.4% to $9.33 billion. However, this followed a huge 33.9% increase in military orders in September.

The September advance had originally been reported as an even larger 60% increase, but the Commerce Department said changes in the original company reports triggered a big downward revision that transformed the overall September figure from a small positive to the big decline.