Washington, DC, Jan. 28--Orders to U.S. factories for big ticket goods edged up in December but still suggested that the nation's battered manufacturing sector isn't out of the woods.
According to the Commerce Department, orders to factories for costly manufactured products rose by 0.2% in December from the previous month. The increase was considerably smaller than the 1 % rise that economists were predicting and came after a sharp 1.3% drop in orders for durable goods--products expected to last at least three years--in November.
Manufacturing, which has been cutting jobs and has seen factories operating well below capacity, has been the weakest link in the national economy's recovery from the 2001 recession. The economy struggled throughout last year with uneven growth, with a quarter of strength followed by a quarter of weakness.
Economists say that a necessary ingredient for the economy to return to full throttle is a sustained turnaround in business investment. Businesses, worried about a possible war with Iraq and other uncertainties, have been in no mood to go on a hiring spree or a buying binge when it comes to capital investments in plant and equipment.
Federal Reserve chairman Alan Greenspan and his Federal Open Market Committee colleagues were holding a two day meeting Tuesday and Wednesday to decide whether or not to change short term interest rates.
Many economists believe the Fed will opt to hold a key interest rate at 1.25%, a 41 year low.
By keeping rates at such low levels, consumers might be motivated to continue to spend and businesses to step up investment, forces that would bolster economic growth.
For all of 2002, new orders for costly manufactured goods dipped by 0.2%, an improvement over the 11.6% plunge suffered the previous year.
The report also showed that orders for transportation equipment fell by 1.9% in December, after a 0.6% increase in November.
Orders for automobiles dropped by 4.5% in December, following a 6.1% decline in November.
Excluding orders for transportation equipment, which can swing widely from month to month, overall orders rose by 1.1 % in December, an encouraging sign, after dropping 2% in November.
In another encouraging sign, orders for computers rose 12.1% in December, a turnaround from the 6% decline posted in November. Orders for electrical equipment and appliances went up 1%, an improvement from the 0.7% decline in November. For machinery, orders rose 0.5%, following a 2.7% drop. But orders for communications equipment plunged by 21.2% last month, on top of a 6% drop.
