Manufacturing Surges 2.5% on Aircraft Orders

A surge in demand for aircraft more than offset a decline in other sectors and powered a 2.5% increase in orders to American factories in November.

The overall gain to a seasonally adjusted $345.1 billion, the sixth consecutive monthly increase, was the largest in 14 months, the Commerce Department said Tuesday.

Transportation orders alone surged 21%, the largest gain since July 1991, on a doubling in demand for aircraft and parts.

Excluding transportation and defense orders, orders for capital goods--such as factory machinery used to make other goods--fell 1.5%.

“That may be one of the first signs that the Asian crisis is beginning to affect the U.S. markets, given that about half the capital goods produced in the United States are exported,” said economist Cheryl Katz of Merrill Lynch.

Moreover, a report issued by a private company last week signaled a further slowdown in manufacturing in December. The National Assn. of Purchasing Management said its monthly index of business activity fell.

In November, factory orders for durable goods--expensive items ranging from aircraft to steel girders and intended to last at least three years--rose 4.8%. It was the fifth increase in six months.

Orders for primary metals such as steel and for electronic and electrical equipment also rose. However, orders for industrial machinery, stone clay and glass products and fabricated metal products declined.

Orders for nondurable goods fell 0.3% in the first drop since August. A decrease in orders for petroleum and chemical products offset an increase in food products.

Shipments of factory goods, a measure of current production, fell 0.3% in November.

The backlog of unfilled orders jumped 2.3%, the sixth increase in seven months, but it was concentrated in aircraft. An overall rise in order backlogs is a sign that factories are too busy to keep up with the flow of orders, and thus a sign of inflation.

Manufacturing inventories, up 16 of the last 17 months, increased 0.4% in November.

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Factory Orders

New orders, in billions of dollars, seasonally adjusted:

Nov. ‘97: $345.1

Source: Commence Department