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Factory orders increase by 2.3%

The December gain, driven by big-ticket goods, is a bright spot in the otherwise struggling economy.

February 05, 2008|From the Associated Press

WASHINGTON — U.S. factories saw demand for their products rise in December by the largest amount in five months, a spot of welcome news that failed to change the picture of an economy struggling to stay afloat.

The Commerce Department reported Monday that orders placed with U.S. factories rose by 2.3% in December. That was an improvement from the 1.7% gain posted in November and marked the biggest increase since July.

The performance in December was slightly better than the 2% rise that economists were forecasting.

Still, Richard Yamarone, an economist at Argus Research, likened the December uptick to "a candle in the hurricane."

Orders for durable goods -- big-ticket items, such as cars, that are expected to last at least three years -- rose by 5% in December, up from a 0.5% advance in November.

Demand for nondurable goods -- including clothing, textiles and beverages -- slipped, however, by 0.4% in December, compared with a 3% rise in November.

For all of last year, total orders -- for durable and nondurable goods -- placed with U.S. factories went up by just 1.4%. It was the worst performance since 2002, when the economy was struggling to recover from the 2001 recession. In 2006, factory orders rose by 5.1%.

Manufacturers have been hard hit by the housing bust and a struggling automotive sector. They also continue to face fierce competition from overseas producers.

Against that backdrop, factories eliminated 28,000 jobs in January and have cut 269,000 jobs over the last 12 months, the government reported last week.

The economy as a whole lost 17,000 jobs last month. That marked the first nationwide loss of jobs since August 2003, when employers were still working to get back on their feet after the recession.

A more forward-looking report, released Friday, suggested that manufacturing gained some ground in January.

The Institute for Supply Management's index of factory activity rose last month to a reading of 50.7, an improvement from the dismal reading of 48.4 posted in December, which suggested that the sector had shrunk at that time. A reading above 50 indicates growth; below that indicates contraction.

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