Your Economy (No Politics)

[Bullwinkle]

U.S. factory orders rise on strong aircraft demand
By Mark Felsenthal
Wed Jan 4, 6:56 PM ET


WASHINGTON (Reuters) - Hefty orders for U.S. aircraft buoyed otherwise weak factory orders in November, a report showed on Wednesday, the second in as many days to raise concerns about U.S. manufacturing.

Separate data showed mortgage applications fell for the fourth straight week as the U.S. housing market gave further signs of slowing after a five-year boom.

New orders at U.S. factories rose 2.5 percent in November, in line with forecasts. But when transportation orders were stripped out, factory orders were unchanged from the previous month, a Commerce Department report showed. Orders for cars and machinery dropped.

"The factory orders report shows that the first two months of the fourth quarter were not especially a great time for manufacturers," said Lehman Brothers economist Drew Matus.

"This is the second signal we've gotten that not all is well in the manufacturing sector of the economy," he said, noting Institute for Supply Management said its index of national factory activity, which was released on Tuesday, was below expectations. The ISM index fell to 54.2 in December from 58.1 in November and short of economists' median forecast for an easing to 57.5.

Markets were still digesting Federal Reserve minutes released on Tuesday suggesting the central bank is close to ending its year-and-a-half long rate raising cycle.

Treasury prices drifted higher, also supported by bets the slowing housing market would scale U.S. growth back a notch.

The dollar fell to two-month lows against the euro and Swiss franc. Major stock market indexes edged up, also boosted by a strong brokerage upgrade of Internet search engine company Google Inc. (Nasdaq:GOOG - news). The Dow Jones industrial averaged closed up 0.3 percent at 10,880, while the tech-laded Nasdaq closed up 0.88 percent at 2263.

BIG YEAR FOR BOEING

Gains in factory orders were propelled by a 15.8 percent rise in transportation equipment, led by a 134.3 percent surge in nondefense aircraft and parts orders.

The spike in civilian aircraft orders is largely reflective of a record year for orders at Boeing Co. (NYSE:BA - news), the top U.S. aircraft maker. Principally thanks to big orders from Asia and the Middle East, Boeing had booked 870 plane orders through late December and is on pace to recapture the top spot globally from European arch rival Airbus (EAD.PA). It will report final figures for 2005 on Thursday.

At the same time, defense aircraft and parts orders slid 42.9 percent and car and parts orders dropped 7.8 percent, the weakest reading for auto orders since December 2002, when orders tumbled 11.4 percent.

General Motors, Ford and Chrysler reported weak auto sales in December, as consumers sought smaller, more fuel-efficient cars and U.S. auto makers lost ground to Asian rivals, according to data released on Wednesday.

Similarly, orders for nondefense capital goods climbed 19.6 percent, a record increase, based on aircraft orders. But when those orders were stripped out, nondefense capital goods -- a proxy for business spending -- fell 2.1 percent.

Orders for durable goods, expensive items meant to last three years or longer, rose 4.4 percent in November, unrevised from a report December 23.

The inventories-to-shipments ratio -- a measure of how long it would take to deplete stocks at the current shipment pace -- was steady at a low 1.18 months' worth.

Mortgage applications fell in the week ended December 30 despite a rebound in refinancing activity, the Mortgage Bankers Association said. Volume was at its lowest level since June 2004.

Other reports showed sales at chain stores were modestly higher in the final week of December when compared to a year ago. A clearer picture of retailing will emerge on Thursday when chain stores report monthly sales.

Redbook Research, an independent company, showed sales at major retailers rose by 2.6 percent last week on a year-over-year basis.

A second retail report concurred. According to the ICSC-UBS Weekly Chain Store Sales Snapshot, store sales were up 2.9 percent compared with the same week a year ago, below the 3.9 percent growth in the prior week.

(Additional reporting by Julie Haviv, Oliver Ludwig, Pedro Nicolaci da Costa, Nick Olivari, Jennifer Coogan, and Chris Reese in New York and Poornima Gupta in Detroit)

http://news.yahoo.com/s/nm/20060104/bs_nm/economy_dc_7