Orders placed with U.S. factories fell in August by the most in more than three years, signaling that slowdowns in business investment and exports restrained the economic expansion.
The 5.2 percent decrease in bookings was the biggest since January 2009 and followed a revised 2.6 percent increase in August, the Commerce Department said Thursday in Washington.
Factories are feeling the effects of Europe’s debt crisis and a slowdown in China and other Asian markets. In the United States, concerns about a fiscal cliff of tax increases and government spending cuts set for January also are putting the brakes on business investment, which has been a mainstay of the expansion.
“The weakening environment for business spending is the quiet killer for economic growth,” said Tim Quinlan, an economist with Wells Fargo Securities in Charlotte, N.C. “This is at a time when you need every component of this economy making every contribution to push the oxcart forward.”
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The drop in factory orders was paced by a 101.8 percent plunge in demand for commercial aircraft, the same as reported last week, and a 3.4 percent drop in computers and electrical equipment, Thursday’s Commerce Department report showed.
Excluding the volatile transportation category, factory orders increased 0.7 percent in August for a second month.
More retail growth
Americans may have slowed their spending in September after splurging during the start of the busy back-to-school shopping season in the month before. But most importantly, they were still spending.
September sales rose 3.9 percent — a slowdown from the 6-percent rise in August — as 22 retailers including Macy’s and Costco reported mixed results, according to the International Council of Shopping Centers. Still, given the economic and political uncertainty that weighs on many Americans right now, analysts say the results are an encouraging sign for stores as they head into what’s traditionally the busiest shopping period of the year in November and December.
“This should set up to be a good holiday season,” said Ken Perkins, president of Retail Metrics LLC, a research firm.
Retailers’ monthly sales figures are based on revenue at stores opened at least a year. That measure, which is considered to be an indicator of a retailer’s health because it excludes results from stores recently opened or closed, offers insights into how Americans are spending during the slow economic recovery.
Because of economic and political uncertainty, The National Retail Federation, the nation’s largest retail trade group, has tempered its expectations for the winter holidays. The group said this week that it expects sales for the November and December period to rise 4.1 percent.
The number of Americans seeking unemployment benefits rose to a seasonally adjusted 367,000, a level consistent with only modest hiring.
Weekly applications increased last week by 4,000 from the previous week’s level of 363,000, the Labor Department said Thursday. The previous week was revised higher from an initial reading of 359,000. The four-week average, a less volatile measure, was unchanged at 375,000.
Joshua Shapiro, chief U.S. economist at MFR Inc., said the figures are “consistent with a soft but by no means collapsing labor market.”
The economy has added an average of just 87,400 jobs a month since April, down from an average of 226,000 jobs a month in the January-March quarter.
Economists predict employers added 111,000 jobs last month, only slightly more than the 96,000 jobs added in August. The unemployment rate is expected to tick up to 8.2 percent from 8.1 percent in August. The rate has been above 8 percent for the past three and a half years.
Contributing: Associated Press