Factory Orders Dip 0.9% in September

Orders to U.S. factories dropped in September, and a broader measure of future economic activity declined, government and business-group reports released Wednesday show.

The Commerce Department said factory orders dropped 0.9% in September, in the first setback since April, when there was a 1.4% plunge. The September decline was blamed on weaker demand for airplanes, cars and industrial equipment.

The Federal Reserve, however, in a separate report released Wednesday, said that most regions of the country were enjoying strong growth, and that the manufacturing sector, which had earlier been struggling because of the Asian crisis, was showing more widespread signs of a rebound.

The Conference Board in New York said its index of leading economic indicators declined 0.1% in September to 107.9, according to revised figures released by the private business-financed study group.

Merrill Lynch economist Stan Shipley said the reports, taken together, showed an economy still enjoying “healthy current growth. But there are some tentative signs of moderation.”

The Fed survey said that although labor markets remain tight across the country, demands for higher pay have not led to higher prices.

So far “there are few signs of a general pickup in prices of final goods and services,” the Fed said in its survey, known as the “beige book,” for the color of its cover.

The San Francisco district reported that economic conditions were strong in the region, with manufacturing activity picking up and retailers reporting strong sales growth, the Fed report said.

The Commerce Department said the drop in factory orders in September was led by a big 4.2% decline in the transportation sector, for that sector’s first decrease since April.

Excluding the volatile transportation category, factory orders fell 0.4%, the largest drop since a 1.9% decline in October 1998.

Orders for industrial machinery and equipment, including computers, which were down four of the last five months, also fell, by 0.7%.

Orders for primary metals, which include steel, also were down for a second consecutive month. They fell 0.7% in September.

In its leading indicators report, the Conference Board said six of the 10 components of the index fell in September, with the greatest drops being in building permits and in manufacturers’ new orders of consumer goods. This index is among the most closely watched because it is designed to forecast trends up to six months in the future.

Economists believe that Hurricane Floyd, which raked the East Coast in September, helped depress factory orders and dampened economic activity as measured by the leading indicator index.