Weak aircraft demand causes US factory orders to fall in November

New orders for US-manufactured goods fell in November amid weakness in demand for commercial aircraft while business spending on equipment appeared to have slowed in the fourth quarter, government data showed on Monday. 

Factory orders dropped 0.4 per cent after an upwardly revised 0.5 per cent gain in October, the Commerce Department's Census Bureau said.

Economists polled by Reuters had forecast factory orders slipping 0.3 per cent after a previously reported 0.2 per cent rise in October. 

Factory orders edged up 0.1 per cent year-on-year in November. 

Manufacturing, which accounts for 10.3 per cent of the economy, has struggled in the aftermath of the Federal Reserve's aggressive monetary policy tightening in 2022 and 2023 to curb inflation. 

A recovery is likely this year as the US central bank cuts interest rates, which was underscored by an Institute for Supply Management survey last week showing its Purchasing Managers Index rising to a nine-month high in December. 

Factory production rebounded after contracting for months, the survey showed. 

A pledge by President-elect Donald Trump's incoming administration to cut taxes could also provide a boost, but other policy promises, including higher tariffs on imported goods, could raise prices of raw materials. Trump on Monday denied a newspaper report that said his aides were exploring tariff plans that would only cover critical imports. 

Stocks on Wall Street traded higher. The dollar slipped against a basket of currencies. US Treasury yields rose. 

Orders for commercial aircraft and parts declined 7.0 per cent in November after rebounding 16.4 per cent in October. Boeing has struggled with a range of problems, including a strike that halted production of its best-selling 737 MAX as well as 767 and 777 wide-body planes as well as safety concerns. 

There were also decreases in orders for computers and electronic products, and fabricated metal products. But orders for machinery rose as did those for primary metals as well as electrical equipment, appliances and components. 

Shipments of manufactured goods nudged up 0.1 per cent, while inventories increased 0.3 per cent. Unfilled orders rose 0.3 per cent. 

The government also reported that orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, increased 0.4 per cent in November. They were revised down from the previously reported 0.7 per cent rise. Shipments of core capital goods advanced 0.3 per cent instead of 0.5 per cent as estimated last month. 

Nondefense capital goods orders decreased 0.9 per cent, rather than 0.6 per cent as initially reported. Shipments of those goods dropped 0.9 per cent rather than by the previously estimated 0.8 per cent. 

Weak shipments suggest softer business investment in equipment in the fourth quarter after two straight quarters of strong growth. 

The Atlanta Fed is currently forecasting gross domestic product rising at a 2.4 per cent annualized rate in the fourth quarter.

The economy grew at a 3.1 per cent pace in the July-September quarter.  (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)