December 13, 2019

Factory Goods Orders Drop Steeply in March

WASHINGTON (AP) — Orders for long-lasting factory goods fell in March by the most in seven months. The drop reflected a steep decline in commercial aircraft demand and little growth in orders that signal future business investment.

The Commerce Department said on Wednesday that orders for durable goods declined 5.7 percent in March. That followed a 4.3 percent gain in February, which was revised lower.

Weaker economies overseas and the impact of across-the-board government spending cuts have made businesses more cautious, reducing demand for manufactured goods. Spending on military equipment also fell sharply last month.

Durable goods are items expected to last at least three years. Orders for durable goods tend to fluctuate sharply from month to month, and economists cautioned against reading too much into one monthly decline.

A measure of business investment plans, which include industrial machinery and computers, ticked up 0.2 percent last month. Economists pay close attention to so-called core capital goods orders because they strip out more volatile defense and aircraft orders.

Increases last month in both orders and shipments of core capital goods suggest businesses increased spending on equipment and software in the January-March quarter. That probably contributed to economic growth in the first quarter.

Still, most of the quarterly gain reflected a huge increase in January. Orders fell sharply in February and rose only slightly last month. That indicates businesses may spend less on equipment in the April-June quarter, economists said.

“This doesn’t look like we’re entering some kind of downward spiral,” said Jonathan Basile, an economist at Credit Suisse. “This seems like a downshift from stronger growth.”

The overall decline in durable goods was exacerbated by a 48.2 percent fall in commercial aircraft orders. Boeing reported that it received orders for only 39 aircraft, compared with 179 in the previous month.

Orders for military aircraft and other military goods also dropped. That most likely reflects the impact of automatic government spending cuts that began on March 1. Joseph LaVorgna, an economist at Deutsche Bank, noted that orders for defense equipment had fallen to their lowest level in over seven years.

Excluding aircraft and transportation demand, orders for durable goods dropped 1.4 percent, the second straight decline.

Demand fell in most types of goods. Orders dropped for metals like steel and aluminum, metal parts, electrical equipment and appliances and defense aircraft. Orders increased for computers and communications equipment.

Many economies overseas were also sluggish, reducing exports. China’s manufacturers grew at a slower pace in March, according to a survey released on Monday, as export orders and employment declined. Europe’s economy has been in recession.

Economists on average are projecting that the American economy grew at a healthy annual rate of about 3 percent in the first quarter, up from only a 0.4 percent rate in the fourth quarter of last year. The Commerce Department will release its first estimate for January-March growth on Friday.

But many economists say they expect growth has begun to slow to a rate of 2 percent or less in the current April-June quarter.

Article source: http://www.nytimes.com/2013/04/25/business/economy/factory-orders-dropped-steeply-in-march.html?partner=rss&emc=rss

Manufacturing and Construction Lift Outlook on U.S. Economy

The Institute for Supply Management, a trade group of purchasing managers, said on Tuesday that its manufacturing index rose to 53.9 in December from 52.7 in November. Readings above 50 indicate expansion.

Also on Tuesday, the Commerce Department reported that spending on construction projects rose 1.2 percent in November, following a revised 0.2 percent drop in October. The increase was the third in four months and the largest since a 2.2 percent rise in August.

The November increase pushed spending to a seasonally adjusted annual rate of $807.1 billion, still barely half the $1.5 trillion that economists consider healthy. Analysts say it could be four years before construction returns to healthy levels.

United States manufacturing has expanded for more than two years. Factories were one of the first areas of the economy to start growing after the recession officially ended in June 2009.

The latest survey from the Institute for Supply Management showed that domestic factories should start the year strongly. Factories hired last month at the fastest pace since June, the survey found. A measure of new orders rose, a good sign for future output. And exports also increased last month, though it was not clear how long that would last. The economy in Europe is faltering as the Continent continues to address its debt crisis.

Consumers are gaining confidence and are spending more. Some economists were forecasting that car sales increased in December after a strong month of sales in November. That should improve output among automakers and also steel companies, tire makers and others that supply the industry.

Orders for long-lasting manufacturing goods jumped in November, the Commerce Department said last month. Most of that increase reflected a huge rise in commercial aircraft orders, a volatile category.

Still, demand for core capital goods, which are often a proxy for business investment plans, fell for the second straight month. Business spending was a crucial driver of economic growth in 2011. If businesses trim spending, economic growth is likely to slow.

Businesses are less likely to retreat, however, if the economy continues to improve.

For construction in November, strength was seen in housing and government spending. Nonresidential construction fell, reflecting declines in construction of office buildings and shopping centers.

The industry was hit hard by the housing bust and has had trouble recovering. But home construction has begun a gradual rebound and should add to the nation’s economic growth. The chief reason is that apartments are being built almost twice as fast as two years ago. Renting is often the only option for many people who have lost their jobs, their homes or both.

Builders in November broke ground on homes at a seasonally adjusted annual rate of 685,000. That was a 9.3 percent jump from October and the fastest pace since April 2010.

Builders should start at least 600,000 homes this year. That is up from 587,000 last year and 554,000 in 2009 — the worst year on record — but it is half the number that economists expect in a healthy market.

Even so, the recovery appears to be strengthening, if fitfully. Last week, the Conference Board said its consumer confidence index rose in December to the highest level since April. That is important because consumer spending accounts for about 70 percent of the economy.

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Paris Air Show Braces for a Flurry of New Aircraft Orders

PARIS — Their corporate chalets may be a touch less spacious and their delegations less numerous, but the titans of the global aerospace industry are returning to Paris this year for what most aviation executives expect will be an affirmation of a steady recovery that is likely to translate into a flurry of orders for newer and more fuel-efficient jets.

The organizers of the Paris Air Show, which opens Monday at Le Bourget airport, north of the capital, said that most major exhibitors had reduced their budgets for the weeklong trade show by 10 percent to 30 percent from the levels of 2009, the last time the industry gathered here.

Still, the number of exhibitors was expected to reach a record, 2,100 — many of them subcontractors and suppliers to companies like Boeing and Airbus — from 80 different countries.

Louis Gallois, the chief executive of European Aeronautic Defense Space, the parent company of Airbus, said he expected a lively week.

“The market is dynamic and definitely on the right track,” Mr. Gallois said during a recent interview. “Traffic is good and airlines are in a better financial situation.”

The global airline industry made a net profit of $18 billion in 2010, bouncing back from combined losses of nearly $26 billion in 2008 and 2009. The airlines are expected to be profitable again this year, to the tune of about $4 billion, according to the International Air Transport Association.

Despite the recent jump in oil prices and turmoil in Japan, North Africa and the Middle East, air passenger and cargo demand are expected to increase 4.4 percent and 5.5 percent, respectively, this year, largely in line with long-term trends.

“The downturn in commercial orders was short-lived,” said Philip Toy, a commercial aerospace analyst at AlixPartners in Southfield, Michigan. He, too, forecast the signing of a number of new contracts in coming days, particularly for the newest version of Airbus’s popular A320 single-aisle jet, which will be fitted with more fuel-efficient engines and a more aerodynamic wing.

The A320neo — the letters stand for New Engine Option — will be available for delivery beginning in 2016, and Airbus has been promising fuel savings of as much as 15 percent over current engines. It is expected also to run more quietly, with lower operating costs, and to be able to fly farther or carry heavier payloads while emitting less greenhouse gas.

Airbus has booked more than 200 firm orders for the re-engined plane since it was presented late last year, with commitments from customers to buy as many as 200 more.

Analysts said the momentum building behind the neo was putting increasing pressure on Boeing, the U.S. plane maker, to follow suit with a revamped version of its 737, rather than produce a fully redesigned single-aisle jet. After more than 18 months of consideration, Boeing has yet to decide which strategy to pursue; it has indicated that an announcement is unlikely at Le Bourget.

“They need to make an announcement very soon, before the end of this calendar year,” or risk losing customers to Airbus, Mr. Toy said. “Airbus is no doubt anxious to increase the noise about Boeing’s indecision.”

Randy Tinseth, vice president for marketing at Boeing, said that the manufacturer continued to lean toward an all-new 737 replacement jet that would enter the market in 2019 or 2020 — an approach that he said more customers preferred. But Boeing was not ruling out a new engine, which he said would be 11 percent more fuel-efficient than those on existing models.

“We are going to take our time,” Mr. Tinseth said. “When the decision is ready to be made, we will make it.”

Meanwhile, Airbus also plans to give an update on the development of its latest plane, the A350-XWB, which is slated for delivery in late 2013. The assembly of the first test aircraft is expected to begin at the end of this year, with flight tests scheduled for 2012.

Analysts said Boeing probably would seek to focus attention during the show on its newest twin-aisle jets: the 787 Dreamliner, its competitor to the A350, and the 747-8, a stretched version of the 747. Both the Dreamliner and the 747-8 will be on display at Le Bourget this year for the first time.

“Boeing will quietly take their blows on the narrow-body front while playing up” its wide-body offerings, said Richard Aboulafia, an analyst with the Teal Group, an aerospace and defense consulting group in Fairfax, Virginia.

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