The final figures for American factory orders came out this morning, and they contained some notably bearish news for the manufacturing sector and the whole U.S. economy. In addition to overall orders dropping for the fourth straight month, orders for capital equipment excluding aircraft and defense goods dropped for the third straight month for the first time since the spring and summer of 2012.
Total manufacturing orders fell between last September and January, too (four straight months), but the January number was presumably affected by the harsh winter. (Truth to tell, however, I have never been clear on why bad weather would affect orders profoundly, as opposed to production or shipments.)
The decline in non-defense capital spending excluding aircraft is even more important because it’s a pretty good proxy for private sector business spending – which can generate the kind of healthy growth that the still heavily indebted American economy needs. Indeed, the final November monthly decrease of 0.5 percent was worse than the advance figure, published late last month, which showed no change.
The year-on-year increase in this “core capex” spending, moreover, slowed to 1.39 percent in November, the slowest rate since February’s winter-affected 2.36 percent. At least manufacturing still has a way to go before that “core capex” order decline matches the 2012 string, which reached seven months.
The new orders statistics for specific industry groups weren’t encouraging, either. The Census Bureau tracks such information for eight such categories: primary metals; fabricated metal products; machinery; computers and electronics products; electrical equipment, appliances, and components; transportation equipment; furniture; and nondurable goods.
New orders fell month-to-month in absolute terms for seven of these eight sectors. (Machinery was the only exception.) These orders were weaker month-to-month in four of the eight sectors – meaning that they fell at a faster rate than the month before, increased more slowly, or saw a gain turn into a loss. These sectors were fabricated metal products; computers and electronics products; transportation equipment; and furniture.
Underscoring the lead role it’s played throughout manufacturing’s recovery from a brutal recession, automotive orders rose in November for the third straight month and matched the record they had previously set in July, 2007 – $22.116 billion. But this continued out-performance also reminds that, outside this sector, a genuine American manufacturing renaissance is still Missing in Action.