Factory orders rebound in December

WASHINGTON -- The nation's manufacturers saw demand for their products grow in December, offering a dose of good news for an industry that has been struggling.

The Commerce Department reported Tuesday that orders to U.S. factories bounced back in December, rising by 0.4 percent over November orders, when orders declined by 0.8 percent.

Stronger demand for computers and household appliances more than offset weaker demand for automobiles and other transportation equipment.

"We are seeing a little bit of a break in the ice for American manufacturers .... their current order books are reflecting a brighter signal," said Carl Tannenbaum, chief economist at LaSalle Bank.

"This is especially encouraging because, after all, manufacturing has been the hardest hit in the last couple of years and its recovery is thought to be central to an improving set of economic conditions in general," he said.

December's performance was slightly better than the 0.3 percent advance analysts were expecting.

But on Wall Street, war worries pushed stocks down. The Dow Jones industrial average closed down 96.53 points at 8,013.29.

On Monday, a more forward-looking report showed manufacturing grew in January for the third straight month though at a slower pace, as worries about a war with Iraq dampened optimism.

Growing sector

Manufacturing activity in January, as measured by the Institute of Supply Management's index, came in at 53.9, below December's 55.2 but above analysts' expectations of 53 for the month. The above-50 reading indicates the sector is still growing.

The two reports on manufacturing offered a sign that the beleaguered sector of the economy may be healing.

Manufacturers, who slashed 592,000 workers last year and have kept plants operating well below normal capacity, have been the weakest link in the economy's ability to recover fully from the lingering effects of the 2001 recession.

For all of 2002, orders to U.S. factories dropped by 0.8 percent. Still, that was an improvement over the sharp 7.4 percent decline for 2001.

And, shipments -- a barometer of demand -- fell 1.1 percent last year, compared with a deeper, 5.5 percent drop for all of 2001.

The Federal Reserve last week held a key interest rate steady at a 41-year low, hoping that will encourage consumers and businesses to spend and invest more, forces that would help the economy grow.

Cars down, computers up

In Tuesday's Commerce Department report, orders for all transportation products fell by 2.7 percent in December after rising 0.7 percent the month before. That decline was led by slackened demand for automobiles. Those orders dropped by 9.6 percent in December, on top of a 2.6 percent decline.

However, orders for computers jumped by 25.3 percent in December, a turnaround from November's 10.6 percent decline.

"The sector is clearly staging a turnaround," said economist Ken Mayland, president of ClearView Economics.

For household appliances, orders rose 10.6 percent in December, after 6.6 percent decline. Orders for furniture went up 3 percent, on top of a 0.4 percent rise.

And, orders for "nondurable" goods, such as food and clothes, went up a solid 1.1 percent, compared with a 0.4 percent dip in November.

Economists say that for the national economy to get back to full throttle, there needs to be a sustained turnaround in business investment in capital projects and in hiring. Companies have been reluctant to make big commitments in these areas given economic uncertainties, including a possible war with Iraq.

"While the economy continues to grow, the road to recovery has been bumpy," said Richard Clarida, the Treasury Department's assistant secretary for economic policy.

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On the Net:

Factory orders report: http://www.commerce.gov/