Originally created 04/03/02

Factory orders dip 0.1 percent in February



WASHINGTON -- Orders to U.S. factories dipped 0.1 percent in February as weaker demand for computers and cars eclipsed gains for household appliances and industrial machinery.

The decline was the first drop in overall orders since November and followed a solid 1.1 percent advance in January, the Commerce Department reported Tuesday.

The weaker-than-expected performance in orders for a wide variety of manufactured goods comes just one day after a more forward-looking report offered some good news for the nation's struggling manufacturing sector.

The Institute for Supply Management reported that a key gauge of manufacturing activity flashed a growth signal in March for the second straight month, a sign that the manufacturing sector is staging a comeback after a year and a half long slump.

Manufacturers have been suffering well before the country fell into a recession in March 2001. Hardest hit by the sour economy, factories throttled back production and laid off hundreds of thousands of workers.

Though a host of recent economic reports indicate that factories are starting to boost production, Tuesday's report suggests there are some rough patches for the industry to overcome.

But economists said that's to be expected and were optimistic that manufacturing would improve.

"I'm not dusting off any double-dip-recession speeches yet," said Ken Mayland, president of ClearView Economics. "So maybe industrial produciton will not immediately ramp up to double-digit growth rates. Manufacturers should nevertheless be able to sustain moderate growth in the months ahead."

On Wall Street, stocks moved lower. The Dow Jones industrial average was off 71 points in morning trading.

Orders for computers fell 4.6 percent in February, following a 5.2 percent increase. Orders for semiconductors declined 8.9 percent, after a 21.3 percent advance. During the slump, companies sharply cut back spending on such high-tech equipment, contributing to the overall economy's weakness. Analysts say they will be looking closely for a sustained boost in this and other capital spending as a key sign that the economy has returned to good health.

Orders for cars fell 1.1 percent in February, after a 1.2 percent gain, although orders for other transportation equipment, including airplanes, posted solid gains.

For primary metals, a category that includes steel, orders slipped 3.1 percent after a 2.3 percent increase.

But for household appliances, orders rose a strong 8.3 percent, after plunging 15.9 percent in January. Orders for electrical equipment went up 13.3 percent, after falling by 13.2 percent. Orders for industrial machinery rose 14.1 percent, following a 3.1 percent decline.

To revive the economy, the Federal Reserve slashed interest rates 11 times last year, pushing some interest rates down to the lowest levels seen in four decades, making borrowing attractive for many businesses and consumers.

Some economists say the Fed may begin to raise short-term interest rate as early as May or June. But others aren't so sure. They wonder whether consumers who snapped up big-ticket goods throughout the slump will continue to spend briskly, a factor affecting the strength of the recovery.

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