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Business Investment Dips Despite Rise in Factory Orders

For a second straight month, orders for factory-made goods that help to signal business investment plans shrunk, which is part of a mixed report regarding manufacturing for November.

Orders for factory products rose by 1.8 percent according to the Commerce Department. The reason for the largest increase since the month of July is primarily because of an increase in orders for airplanes. Airplane orders can vary greatly from month to month.

Items such as computers and electronic equipment, which are core capital goods, saw their demand decrease by 1.2 percent after the demand for these products dropped previously in October. The reason that economists play close attention to this category is because it is a very good indication of business investment. Business investment then can drive economic growth for the country.

The decline in these numbers might be temporary according to some experts. A survey released last week shows that United States factories ended the year with their best month of growth since late in the spring of 2011.



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Last month, factories were able to hire more workers and they saw the most growth in the amount of new orders since the month of April. Factories were also able to increase production, according to the Institute for Supply Management.

Two analysts for RDQ Economics, John Ryding and Conrad DeQuadros, say that they will be more inclined to overlook the negative numbers after seeing the report released by ISM.

“This report for November activity feels like somewhat old news since the state of manufacturing in December has already been indicated in yesterday’s ISM report and it appears from that survey that manufacturing growth is picking up,” the economists wrote in a note to clients.

United States factories face a larger issue in the debt crisis currently occurring in Europe. Economists believe that Europe as slipped into a recession already, which is a major market for goods made in America. Experts also believe that growth of the Asian economy will slow in the next couple of months too. Both of these problems could cause a lower demand for goods produced in America, which would slow the economic growth of the country.

The report from the government on factory orders also showed the following information:

The demand for items expected to last three years, durable goods, increased by 3.7 percent. The increase was seen in automobiles, airplanes, steel and industrial machinery.

The demand for nondurable goods saw an increase of 0.3 percent because of increased demand for petroleum, chemical products and clothing.

The demand for products in the transportation industry increased by 14.7 percent, mainly because of the 14.7 percent increase in commercial aircraft orders.

Motor vehicle and part orders rose by 0.9 percent. Sales have been boosted in the automotive sector because of easier credit and backed up demand.

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