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article imageU.S. factory orders plunged in August

By Larry Clifton     Oct 2, 2014 in Business
Washington - Factory orders, a traditional catalyst for economic growth, plunged in August to the lowest level ever recorded. The fundamental drop in factory production was led by a steep decline in orders for U.S. manufactured commercial aircraft.
Orders dropped 10.1 percent in August after a record increase of 10.5 percent in July, the Commerce Department reported Thursday, according to an AP report. Despite the downward movement of factory output, a key category that tracks business investment plans posted a small increase, suggesting things may not be as bad as the numbers suggest.
Still, orders for core capital goods — a category seen as a proxy for business investment — managed only a weak gain of 0.4 percent in August after a 0.1 percent July dip, does not suggest a robust economic recovery is underway. Beyond the decline in commercial aircraft sales, orders for durable goods, items expected to last at least three years, dropped a record 18.4 percent in August. However, some economists say robust sales reported by automakers may provide a boost to factory orders in the fourth quarter.
Nevertheless, taking commercial airliner sales out of the mix, orders still would have dipped slightly at 0.1 percent in August. Demand for primary metals such as steel dropped 1.3 percent, while orders for machinery managed a 0.9 percent increase. Orders for computers dropped 15.2 percent, but demand for electrical appliances rose 2 percent.
The path of the economy has been more like that of a roller coaster than a slow climb toward a peak. On Wednesday, the Institute for Supply Management reported that its barometer of manufacturing performance fell to 56.6 in September from 59 in August. Analysts attribute the slowdown to a recent drop-off in global demand and a rise in the value of the dollar. As the dollar gains value, American goods become more expensive abroad which drives down factory production.
Economists are hoping for a more uniform rate of growth in the coming months. Anemic growth rates of about 2 percent have plagued the nation for five years, making the current economic recovery the slowest since the 1930s.
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