Economic Concerns Cause Drop in Factory Orders

[Nov 19, 2007.]

The U.S. Commerce Department reports that orders for big-ticket manufactured goods dropped last month amid new signs of economic turmoil.

According to the Commerce Department, orders for durable goods declined 1.7% in September. That followed a 5.3% decrease in August. Durable goods are defined as items which can be reasonably expected to last at least 3 years.

The August and September figures represent the first time in more than a year that orders for durable goods have declined two months in a row. Analysts were reportedly surprised by the disappointing figures. Forecasters had expected new orders for durable goods would rebound by 1.5% last month.

Economists blame the housing crisis and the credit crunch for the downturn in demand for manufactured items. The housing market is not expected to recover until at least the middle of next year. While the subprime loan market has virtually collapsed, some forecasters are predicting that the sector will rebound. Still, some economists are saying that the economy may be teetering on the brink of recession. So far, though, the problems within the housing industry have yet to have a ripple effect on the economy at large.

Demand proved to be soft in September for a number of durable goods, including cars, fabricated metals, appliances, computers, and electronic goods.

Meanwhile, the job picture may be brightening for the nation's workers. The number of unemployment claims dropped recently by 8,000 to a total of 331,000. However, economists had actually predicted that the number of claims would decline by a more significant amount, indicating the troubles in the employment sector are not over yet.

Forecasters are now saying that seasonal hiring will be lower during the Christmas rush than it was last year at this time. This disappointing prediction appears to be due to the expectation of sluggish retail sales. Still, retailers will be hiring extra workers to handle the holiday shopping season, indicating that November and December could still see extra retail sales.

Julie Ann Amos
November 19th 2007

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