Factory orders up 1.6 percent in January, fresh sign of manufacturing turnaround

Posted 2:22PM on Wednesday 6th March 2002 ( 23 years ago )

WASHINGTON - Orders to U.S. factories rose by 1.6 percent in January, lifted by stronger demand for cars, computers and machinery, providing new evidence that the battered manufacturing sector is turning a corner. The advance followed a 0.7 percent rise in December and was the third increase in the last four months, the Commerce Department said Wednesday. Separately, the Federal Reserve, in a nationwide survey of business activity around the country, suggested that signs of a recovery were becoming more widespread in January and early February. Most of the areas surveyed reported "some signs of improvement in economic conditions," the Fed said. In its previous survey of business conditions, the Fed said there were "scattered reports of improvement." Many business contacts in the beleaguered manufacturing sector told the Fed that they expect to boost production by the second half of this year. And, some factories reported they weren't cutting as many workers as they did last year. A host of recent economic reports has indicated the recession, which began in March 2001, has probably ended and will be recorded as one of the mildest in U.S. history. Hardest hit by the ailing national economy have been manufacturers, which have been mired in a slump for the last year and a half. To cope, they have sharply cut production and laid off workers. But Wednesday's reports and other data on manufacturing activity suggest the industry is on the mend. Last week, the Institute for Supply Management reported that for the first time in 18 months a key gauge of manufacturing flashed a growth signal. The group's index of manufacturing activity jumped to 54.7 in February from 49.9 in January, suggesting that manufacturing is pulling out of a long slump. An index above 50 signifies expansion, while a figure below 50 shows contraction. On Wall Street, stocks were mixed. The Dow Jones industrial average was up 75 points at midafternoon and the Nasdaq index was down 5 points. The latest snapshot of the economy is consistent with the cautiously upbeat economic assessment Federal Reserve Chairman Alan Greenspan provided to Congress last week. His message: The country, bruised by the recession and the terrorist attacks, is on the road to recovery but there still are some possible potholes. Wednesday's report showed that orders for transportation equipment rose 4.1 percent in January, following a 1.8 percent advance. Orders for cars went up by a solid 0.8 percent, after dipping by 0.3 percent the month before. Excluding orders for transportation equipment, factory orders rose 1.2 percent in January, the fourth increase in the last six months. Orders for computers and electronic products rose 1.9 percent, on top of a 3.6 percent increase in December. Orders for computers went up 4.8 percent and orders for semiconductors rose 14.2 percent. These advances are a good sign for the high-tech sector, which took a big hit when companies scaled back capital spending in response to the slump. Higher demand for machinery pushed orders up 1.4 percent in January. These orders fell by 0.6 percent in December. Primary metals, the category that includes steel, saw orders rise 3 percent in January after falling the previous two months. A weak spot: Orders for electrical equipment and household appliances fell 4.9 percent in January, following a 3.2 percent drop. The National Association of Manufacturers has said momentum is building for a manufacturing turnaround in the early months of 2002. While recent economic reports suggest the economy is heading in the right direction, Greenspan and some other analysts have cautioned that Americans shouldn't expect a red-hot rebound. Because consumers kept buying throughout the slump, they will have less pent-up demand. That means spending probably won't rise as quickly as in past rebounds, making the recovery less robust than usual, Greenspan and other economists said.

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