Factory orders dip 1.5 percent in February

WASHINGTON -- Manufacturing is faltering as the weight of uncertainties surrounding the war in Iraq causes businesses and consumers to turn more cautious.

Orders to U.S. factories fell 1.5 percent in February, the worst showing in five months, the Commerce Department reported Wednesday. Private economists said manufacturers could see orders fall even more in March given the muddled economic climate.

In February, orders dropped for metals, machinery, computers and electrical equipment. Orders for automobiles and parts were flat.

"Things are indeed grim in the manufacturing sector," said Richard Yamarone, economist with Argus Research Corp.

On Wall Street, however, investors shrugged off the latest manufacturing news and rallied on the hope the war would end quickly. The Dow Jones industrial average surged 215.20 points to close at 8,285.06.

A more-forward-looking report, released Tuesday, offered an unsettling picture of the manufacturing sector for March: The Institute for Supply Management's manufacturing index fell to 46.2 from February's 50.5. A reading below 50 means manufacturing activity contracted.

Manufacturing has been the weakest link in the national economy's ability to get back to full throttle.

Some private economists worry that the weakness could spread to other parts of the economy, throwing it into a new recession. Chances of a so-called double dip recession are growing, economists say, because the job market is expected to lose more ground.

The nation's unemployment rate rose to 5.8 percent in February. Economists believe it could move to 5.9 percent or 6 percent for March, and higher in the months ahead.

The government reports on the employment situation for March on Friday.

Economists also believe the economy lost 40,000 jobs in March alone. That wouldn't be good, but it wouldn't be as bad as February when payrolls were slashed by 308,000.

A big fear is that a worsening labor market will make consumers -- a key force keeping the struggling economy going -- turn more cautious, slowing the economy even further.

Uncertainties surrounding the war, higher energy prices, lackluster profits and a turbulent stock market are among the forces that have made businesses reluctant to invest heavily in capital projects and to embark on new hiring.

"Decision making has been stalled pending worries about the war and worries about consumers," said Clifford Waldman, an economist with Manufacturers Alliance/MAPI, a research group.

The 1.5 percent over-the-month decline in February came after factory orders went up by a solid 1.7 percent in January, a brief bright spot in otherwise lackluster activity.

In Wednesday's report, orders for automobiles were flat in February, after rising 12.5 percent the month before.

Orders for primary metals went down 2.5 percent, erasing most of January's 2.7 percent gain. For machinery, orders fell 2.5 percent in February, compared with a 3.2 percent advance in January.

Orders for computers plunged 16.5 percent in February, on top of a 4.9 percent decline. Electrical lighting equipment orders plummeted 11.1 percent, a reversal from a 14.6 percent gain.

For furniture, orders went down 5.6 percent in February, following a 1.6 percent decline.

Orders for "nondurable" goods, such as food and clothes, fell 1.4 percent in February after a 1.3 percent gain.

----

On the Net

Factory orders: www.commerce.gov/