U.S. Factories Keep Humming: Orders Rose 2.1% in September

U.S. factory orders
U.S. factory orders

Investors got more evidence today that the manufacturing sector expansion continued into late summer/early fall, as factory orders increased 2.1% in September, the U.S. Commerce Department announced today. The more-telling ex-transportation component rose 0.4%.

A Bloomberg survey had expected September factory orders to rise 1.8%, after remaining the same in August, which was revised upward from the initially estimated 0.5% decline. Factory orders also rose 0.5% in July.

The ex-transportation component is key because it excludes often-volatile transportation orders, providing a more accurate measure of core industrial conditions. September's 0.4% ex-transportation increase shows that segment continued to expand at a decent pace. August's ex-transportation tally was also revised higher, to an increase of 1.3%, versus the initial 0.9% estimate. The ex-transportation component fell 0.9% in July.

Excluding defense, factory orders rose 1.9% in September and rose a revised 0.1% in August, also better than the preliminary 0.5% decline. The ex-defense component rose 0.5% in July.

A Major Value-Added Component

By category, September transportation orders jumped 15.8%, durable goods orders increased 3.5%, machinery rose 2.2%, furniture rose 1.1% and nondurable goods items climbed 0.9%. On the downside, appliance orders dipped 0.2%, primary metals declined 0.3%, fabricated metal decreased 1.3% and computer orders fell 2.7%.

The factory orders statistic is closely watched because it provides one of the most comprehensive surveys of advance orders for durable goods -- how busy factories are likely to be in the period ahead.

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Factory orders also are a major value-added component of the U.S. economy. However, economists also caution investors not to put too much emphasis on the initial monthly stat because the total typically is revised in subsequent monthly reports as more complete data becomes available.

September's factory orders report confirms that the nation's manufacturing sector continues to expand, and it may even be gaining some stream. Although the current pace is slower than during the recovery's inventory-rebuilding stage, September's 2.1% gain and the upward revision in August's tallies reflect a factory sector that's still humming.

Add in an expanding services sector and gains in private payrolls, and the picture is one of a U.S. economy that may be getting some traction, one that may be a step closer to a self-sustaining expansion.