Factory Orders Rise for Second Month in January

U.S. manufacturing orders rose in January for a second straight month, another sign the economy is starting to recover from recession.

Orders increased 1.6% to $325.8billion, reflecting more demand for autos and computers, after rising 0.7% in December, the Commerce Department said. The last time factory orders rose in consecutive months was February and March 2001, just as the economy was slipping into recession.

A recovery “may indeed have begun,” said Anthony Santomero, president of the Philadelphia Federal Reserve Bank and a voting member of the Fed’s policy-setting Open Market Committee. “Recent statistics on economic activity are heartening, in fact, surprisingly strong.”

“Compared to past recoveries, this one may turn out to be somewhat milder, at least in its early stages,” Santomero said.

The view was underscored by the Fed’s latest regional economic survey, or “beige book,” which said the economy was showing signs of recovering.

Retailers in most of the 12 Fed districts reported “modest improvements” in sales compared with the end of last year, the Fed said in its report. Manufacturing remained “generally weak,” though higher demand and reductions in inventories had led to an increase in production by auto makers and high-tech companies. And service industries were “mostly sluggish or flat,” the Fed said.

Excluding transportation equipment, factory orders rose 1.2% in January after a 0.5% increase. More orders are being placed with manufacturers after demand increased in the fourth quarter at the fastest pace in 31/2 years. That helps explain why companies such as Ford Motor Co. and Whirlpool Corp. are boosting production and raising earnings estimates.

Wednesday’s report showed January’s increase in orders was led by a 2% gain in bookings for durable goods, which account for about half of all factory orders. Orders for paper, food, petroleum and other nondurable goods rose 1.1% in January after rising 0.5% in December. The January increase was the biggest since May of last year.

Orders for transportation equipment rose 4.1% after increasing 1.8% the previous month. The rise was led by a 0.8% increase in orders for vehicles and parts. Ford, the No. 2 auto maker, said it plans to increase car and truck production by 4.4% in the second quarter.

Computers and electronic products orders increased 1.9% in January after a 3.6% jump in December. Orders for computers and semiconductors rose in January.

Orders for non-defense capital goods excluding aircraft, a barometer of firms’ plans to invest in new equipment, rose in January for the third time in four months. Those orders, which increased 1.5% in January, rose in the last three months at an 8.5% annual rate.

Meantime, factory inventories fell 0.6% in January, the 12th straight decline, a sign manufacturers may boost production.