Factory Orders Fall; Announced Layoffs Up
U.S. factory orders plunged in September and layoff announcements by American firms surged in October, according to reports Monday that reinforced belief the Federal Reserve will cut interest rates.
The value of new orders to factories tumbled 2.3% in September to $318.1 billion, after a 0.4% decrease in August, the Commerce Department said.
In a separate report, the outplacement firm Challenger, Gray & Christmas Inc. said job cuts announced by U.S. firms rocketed to 176,010 in October, a rate of more than 7,600 per business day.
The October figure marked the second-largest number of announced layoffs this year, fewer only than January’s, and compared with 70,057 announcements in September.
“The Challenger report underscores that businesses are continuing their efforts to cut costs,” said Christopher Wiegand, economist at Salomon Smith Barney in New York.
The central bank’s policy arm, the Federal Open Market Committee, meets Wednesday to consider a possible change in interest rates. A large majority of economists expect a cut in borrowing costs at that meeting, with most analysts wagering on a quarter-point reduction.
Even though the September orders number was grim, the 2.3% drop was not as steep as the 3% decline projected by economists.
The declines also were concentrated in two well-known trouble spots -- airlines and communications -- and some categories such as nondurable goods showed improvement.
Orders for nondurable items, such as clothing, paper and chemicals, edged up 0.9%.
The key durable-goods component of the report showed a 4.9% drop in September, compared with the 5.9% nosedive the Commerce Department originally had reported.
Also, total factory orders excluding the volatile transportation sector actually rose by 0.6%.
Transportation orders plummeted 15.9%, due to a 46.3% drop in orders for civilian aircraft.
The total factory inventory-to-sales ratio rose to 1.33 in September from 1.32 in August, signaling a higher backlog of goods that may leave less incentive for factories to ramp up production.
