Tuesday, January 05, 2010

U.S. factory orders rose in November by 1.1% to $365.3 billion, according to the U.S. Commerce Department’s Bureau of the Census. The increase reflects strong demand in a number of industries from steel and industrial machinery to computers and chemicals and implies that companies are boosting spending and production after the record inventory reduction in the first nine months of 2009.

Shipments were up five of the last six months, and if were not for a drag from transportation, orders would have been up 1.9%. Inventories rose 0.2%. Computers and electronics were the biggest gainers, up 4.9%, or $2 billion.

The report provides more evidence of a rebound in manufacturing as industries are beginning to show signs of recovery. The Institute of Supply Management reported that its index showed manufacturing expanding in December at the fastest pace in more than three years.

The production should lead to more hiring and corporate investment as the economy recovers from the worst recession since the 1930s, but most analysts still predict a slow recovery in 2010. “The U.S. manufacturing sector concluded 2009 on something of a high note as the ISM index for December indicated a fifth consecutive month of growth at a pace that was modestly quicker than seen in November,” said Cliff Waldman, Economist for the Manufacturers Alliance/MAPI. “New orders and production growth both strengthened impressively. But there are demand difficulties in the business and household sectors resulting from high unemployment, excess capacity, an uneven global recovery, and shaky consumer and business confidence. These issues suggest that while 2010 will be a recovery year for the U.S. factory sector it will likely be muted and insufficient to soak up historic excess capacity.”