Factory orders increase 1.7 percent in November

WASHINGTON -- Orders to U.S. factories bounced back a bit in November, rising 1.7 percent as demand grew for airplanes, electronics and industrial machinery.

In another report, the Labor Department said new claims for state unemployment insurance rose last week by 16,000 to a seasonally adjusted 375,000, the highest point in more than two years

The Commerce Department reported Thursday that total factory orders rose to a seasonally adjusted $377.6 billion, up from $371.3 billion the month before. Many analysts were expecting factory orders to rise by 1.2 percent.

The rise was not enough to recover the 4.0 percent decline in orders in October. That revised figure was weaker than the government had previously reported.

In another report, the Labor Department said new claims for state unemployment insurance rose last week by 16,000 to a seasonally adjusted 375,000, the highest point in more than two years and suggesting that employers' demand for workers is waning.

It marked a larger increase than some analysts were expecting and the highest level since July 4, 1998, when claims were at 384,000.

Not wanting the economic slowdown to slip into a recession, the Federal Reserve, in a surprise move Wednesday, cut short-term interest rates by a bold, half a percentage point. The action is designed to lower borrowing costs and spur business investment and consumer spending, thus boosting economic growth.

With the economy slowing rapidly, analysts expect that the nation's unemployment rate for December -- to be released by the government Friday -- will rise a notch to 4.1 percent from 4 percent.

The Fed said its actions Wednesday were taken in light of further weakening of sales and production, lower consumer confidence, higher energy prices and tighter credit conditions.

Some economists believed that the Fed was particularly concerned by a report released Tuesday showing that manufacturing activity fell in December to its lowest point since the country was mired in a recession in 1991.

Given that report, Thursday's factory orders figures are not likely to provide much cheer to manufacturers.

New orders for transportation equipment posted the largest increase in November, rising 8.8 percent, mostly due to higher demand for airplanes and aircraft parts. That followed a sharp 17.3 percent drop the month before.

Excluding the volatile transportation category, new orders rose 0.7 percent, the fifth increase in the last seven months. The transportation sector swings widely from month to month because it includes costly items such as airplanes, ships and military tanks.

Orders for electronic and electrical equipment, including household appliances and communications equipment, rose 7 percent in November after an 11.8 percent decline.

Industrial machinery orders, including those for computers and machines tools, went up by 0.5 percent, the first increase since July, after falling 0.2 percent in October.

New orders for all durable goods, big-ticket manufactured items expected to last at least three years, increased by 2.5 percent in November, following a 6.6 percent drop the month before.

And, orders for nondurables, such as food and fuel, rose 0.7 percent, up from a 0.5 percent decline in October.

Primary metals, the category that includes steel, however, fell by 1.9 percent on top of a 3.4 percent decrease in October.

Shipments, a barometer of current production, declined by 0.4 percent in November after a 1.2 percent decrease.

Between June 1999 and May of 2000, the Fed boosted interest rates six times in an effort to slow the economy and keep inflation under control. In December, the Fed shifted its main policy away from fighting inflation through higher rates to guarding against an economic downturn.