Defense Sector Drags Down Nov. Output

A big drop in demand for military airplanes pushed down factory orders in November. But a wide range of goods, from computers to cars, posted gains, suggesting better days may be ahead for the battered manufacturing sector.

Even though the Commerce Department’s report Tuesday showed that orders to U.S. factories fell 3.3% in November, economists were encouraged because orders for many other categories, including the hard-hit high-tech sector, rose.

“It’s looking to me like the manufacturing sector has hit a bottom,” said economist Clifford Waldman of Waldman Associates. “But it is questionable how long manufacturing will be at the bottom. I think we’ll see a slow, grudging climb from here.”

A more forward-looking report released last week by the Institute for Supply Management showed that a rise in new factory orders helped push a key gauge of manufacturing activity higher in December, suggesting the sector is beginning to emerge from a 17-month slump.

In the November factory orders report, the computer and electronic products category posted its second consecutive increase--up 1.8% in November, after rising 8.9% in October.

The decline in overall orders to U.S. factories in November stemmed from an 82.4% drop in new orders for defense aircraft and parts. The month before, orders in this category zoomed up 491.6%, helping to boost total factory orders 7%.

The big drop in orders for defense aircraft and parts masked gains elsewhere.

Excluding orders for defense equipment, orders to U.S. factories rose a solid 0.8% in November, on top of an even bigger 2.9% advance in October.

The report showed that orders for cars rose 5.25% and commercial airplanes and parts posted a 17.2% gain in November.

Orders for machinery rose 2.5% in November, after slipping 0.4%.