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Manufacturing blow as aircraft orders plunge

WASHINGTON, September 26, 2014

Orders for long-lasting manufactured goods slumped in August as demand for commercial aircraft descended from record highs, but investment plans by businesses posted promising gains.

Durable goods orders fell 18.2 per cent in August following a 22.5 per cent jump in July, the Commerce Department reported yesterday (September 25), said a report in the Gulf Daily News (GDN), our sister publication.

Both the big increase and the big drop were records. They reflected sharp swings in demand for commercial aircraft, an extremely volatile category that can skew overall results. Airplane orders fell 74.3 per cent in August.

More importantly, however, a key category that serves as a proxy for business spending plans rose 0.6 per cent.

The figure offers further evidence that manufacturing is a key source of strength for the economy this year. Economists expect businesses to boost spending as they expand and modernise their operations.

Orders for motor vehicles and parts also fell, declining 6.4 per cent after a 10 per cent increase in July. The August dip was expected to be temporary given the strong sales gains automakers have enjoyed this year.

Excluding the volatile transportation category, orders would have risen 0.7 per cent in August after a 0.5 per cent drop in July.

Industries showing higher demand in August included machinery, up 0.7 per cent, and electrical equipment and appliances, which rose 3.1 per cent.

A separate report from the Federal Reserve showed that manufacturing output fell 0.4 per cent in August, marking the first decline in seven months. The drop stemmed from a sharp downturn in production at auto plants, due mainly to seasonal adjustment issues.

Meanwhile, the number of people seeking US unemployment benefits increased last week after falling sharply two weeks ago. Despite the rise, the level of applications remains near pre-recession levels, a sign that hiring will likely remain healthy.

Weekly unemployment benefit applications rose 12,000 to a seasonally adjusted 293,000, the Labour Department said yesterday. Yet the four-week average, a less volatile measure, fell for the second straight week to 298,500.

The figures are 'very low ... close to all-time lows when measured as a share of payrolls,' said Pantheon Macroeconomics chief economist Ian Shepherdson in a research note. 'We expect robust job growth in the months ahead.'

Two weeks ago, applications had plummeted to 281,000, near a 14-year low first reached in July. Over the past year, the four-week average for applications has fallen 7.1 per cent. They climbed above 650,000 during the recession in 2009.

Applications are a proxy for layoffs. Fewer applications indicate that employers are holding onto their workers, likely because they are more confident about the economy. It may also indicate they will boost hiring.

The total number of people receiving benefits ticked up by 7,000 to 2.4 million. A year ago, 3.9 million people were receiving unemployment aid. That number has fallen sharply partly because of the expiration of extended benefits, a program that ended at the beginning of this year.

Applications fell steadily through the summer. At the same time, job gains have been solid, despite a slowdown in hiring in August.

Employers added just 142,000 jobs last month, according to the Labour Department, down from an average of 212,000 in the preceding 12 months. It was the end of a six-month streak of monthly job gains in excess of 200,000.

The unemployment rate fell to 6.1 per cent from 6.2 per cent, but only because some of those out of work gave up looking. The government doesn't count people as unemployed unless they are actively searching.

Still, most economists expect hiring will continue at a healthy pace this year. Surveys of both manufacturing and services firms show that companies in both sectors added workers in September. - TradeArabia News Service

Tags: aircraft | manufacturing | Orders | plunge |

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