Factory Orders Fall, First Time in 3 Months

In fresh evidence the economy is weakening, factory orders for expensive, long-lasting goods fell in October for the first time in three months.

The Commerce Department reported Thursday that durable goods orders declined 1% last month as demand for aircraft, automobiles and military hardware plunged.

The signs of sluggishness--including reports of lackluster retail sales at the beginning of the holiday season--were welcome news to the bond market. Merchants said sales were running about 3% higher in November, compared to a 4.2% gain in the same month last year.

Bond prices soared to a two-year high, pushing the yield on the Treasury’s key 30-year bond down to 6.12. The stock market, after a six-day run of record highs, fell in late trading. The Dow Jones industrial average closed down 31.07 points.

Analysts pointed to sluggish job growth and cautious spending by debt-heavy consumers as evidence the economy could benefit from lower interest rates.

The Federal Reserve Board meets Dec. 19 for a year-end review of the economy and monetary policy. Analysts said uncertainty over the outcome of budget negotiations between Republicans and Democrats could postpone a rate cut.

The Fed shaved a quarter percentage point off a key rate in July, the first cut in nearly three years, but has left rates unchanged since.

The Labor Department said Thursday that the number of American workers filing first-time claims for jobless benefits fell to a five-week low last week. The decrease of 16,000 was the largest drop in nine weeks.

But analysts said job growth is slowing and the decline last week might be partly because of the closing of government unemployment offices for the Thanksgiving holiday.

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Durable Goods

New orders, in billions of dollars, seasonally adjusted:

Oct. 1995: $167.3

Source: Commerce Department