WASHINGTON – Orders to U.S. factories rose modestly in October, helped by a big gain in demand for equipment that reflects business investment plans.
Factory orders edged up 0.8 percent in October, the Commerce Department said Wednesday. The increase slowed from a 4.5 percent jump in September.
Orders for core capital goods, a category viewed as a good proxy for business investment plans, increased 2.9 percent in October, the biggest increase in eight months. That represented an upward revision from an initial estimate of 1.7 percent. The increase came after big declines in the investment category this summer.
Orders for durable goods rose 0.5 percent in October, up from a preliminary estimate of no gain, while orders for nondurable goods, items such as chemicals and paper, were up 1.1 percent.
Businesses have been holding back on investment plans because they are worried about the fiscal cliff. Thats the name for sharp tax increases and federal spending cuts that will take effect in January if Congress and the Obama administration do not reach a budget deal by then to avert them.
There is also more caution because of slower growth overseas and Europes debt crisis. Those developments have cut into U.S. exports and corporate profits.
The 2.9 percent rise in orders for core capital goods in October was the biggest one-month gain since a similar increase last February. It followed a 0.5 percent drop in September and marked only the second advance in the past five months.
U.S. manufacturing shrank in November to the weakest level since July 2009, according to a survey released Monday by the Institute for Supply Management. Worries about automatic tax increases in the New Year cut demand for factory orders and manufacturing jobs.
Productivity growsQuick take: U.S. worker productivity grew at an annual rate of 2.9 percent, faster than the initial estimate of 1.9 percent. Labor costs fell at an annual rate of 1.9 percent, a bigger drop than the 0.1 percent dip initially estimated.
Trend still weak: Productivity is up just 1.7 percent over the past year, below the long-run average of 2.2 percent. Productivity is expected to remain modest next year, as companies reach the limits on the amount of work they can squeeze out of their existing workforces.