News Of Economy

US Factory orders plunge could upset economic recovery

May 31, 2012

Orders placed with U.S. factories declined sharply to mark the biggest in more than six years in January. The recent plunged has made weakness in manufacturing sector explicit as companies worked off bloated inventories. In fact, factory orders fell by 5.6 percent after a 2.6 percent gain in November last year that was larger than earlier reported by the US Commerce Department. The recent data showed that orders for big-ticket durable goods, items usually expected to last at least three years such as computers and cars, plummeted significantly by 8.7 percent in January against the initially estimated 7.8 percent drop and compared to a gain of 3.5 percent in December. In the meantime, orders for no durable goods, items such as petroleum and food, fell by 2 percent in January after a 1.5 percent increase in December. Moreover, a destabilized manufacturing sector has apparently raised anxiety about the stability of the growth. With housing investment still falling sharply, many experts had counted on higher business investment spending to boost economic growth. However, business capital spending has been considerably feeble, clearly leaving it up to the consumer to hold up the economy. On the other hand, analysts are of the view that the plunge in the factory sector is a temporary slowdown, mainly triggered by excessive inventories in a few sectors that should be worked off in a few months. Few analysts belonging different school of thought argue that capital spending will not rebound to any significant degree.

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