SrRojo
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 Posted: Wed Mar 05, 2008 7:22 pm Post subject: Factory Orders Fall in Sign of Chill |
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http://www.nytimes.com/2008/03/05/business/apee-econ.html?hp
Factory Orders Fall in Sign of Chill
--"Nuh tham nod."--L'il Jak
By THE ASSOCIATED PRESS
Published: March 5, 2008
WASHINGTON (AP) -- American factories saw demand for their products
drop sharply, fresh evidence of an economy hobbled by housing and
credit crises, the government said Wednesday. Another report showed
the country's service sector continuing to contract, but by less than
economists expected.
The Commerce Department reported that new orders for manufactured
goods fell 2.5 percent in January from the previous month. That marked
a deterioration from December's 2 percent increase and was the biggest
decline in five months.
Meanwhile, activity in the nation's service sector shrank in February
for the second straight month.
The Institute for Supply Management's service sector index clocked in
at 49.3, with a reading below 50 indicating a contraction. The latest
figure is above the 47.5 forecast from economists surveyed by Thomson
Financial/IFR, and higher than January's reading of 44.6, when the
survey surprised Wall Street by falling to its lowest level in more
than six years.
Manufacturers, service providers and other companies are feeling the
sting of the economic slowdown. Persisting problems in the housing and
credit markets are causing both people and businesses alike to be more
cautious in their spending and investing. Galloping energy prices also
are adding to the strains.
The latest snapshot of manufacturing activity was on target with
economists' predictions. The weakness was mostly concentrated in
demand for costly "durable" goods, merchandise expected to last at
least three years. These orders -- including cars, airplanes, machinery
and computers -- dropped 5.1 percent in January, compared with a 4.4
percent increase in December.
Demand for "nondurables," such as food and clothing, edged up 0.3
percent in January, an improvement from a 0.4 percent decline in the
previous month.
In other economic news, worker productivity slowed sharply in the
final three months of last year as the economy lost momentum.
The Labor Department reported that productivity -- the amount an
employee produces for every hour on the job -- increased at an annual
rate of just 1.9 percent in the October-to-December quarter. This key
measure of workplace efficiency was down considerably from the third
quarter's brisk, 6.3 percent growth rate and was the slowest pace
since the first quarter of last year.
As productivity growth slowed, labor costs went up.
Employers' unit labor costs rose at a 2.6 percent clip in the fourth
quarter. That compared with an annualized decline of 2.7 percent in
the third quarter. It marked the largest increase in labor costs since
the first quarter of last year. Unit labor costs is a measure of how
much companies pay workers for every unit of output they produce.
The revised reading on fourth-quarter productivity was slightly better
than the 1.8 percent growth rate initially reported by the government.
Economists were expecting no change in that initial estimate.
The productivity report included annual revisions based on more
complete data.
For all of 2007, for instance, productivity rose 1.8 percent, up from
a 1 percent gain in 2006. Labor costs, meanwhile, rose faster --
growing by 3.1 percent last year. In 2006, labor costs rose 2.9
percent.
Efficiency gains are important to the economy's long-term vitality.
They can help blunt inflation. The gains can allow companies to pay
workers more without raising prices, which would cut into paychecks.
For now, the No. 1 mission of the Federal Reserve chairman, Ben S.
Bernanke, is to help bolster overall economic growth. Many fear the
United States is on the brink of a recession or already in one.
The economy nearly stalled in the final quarter of last year, growing
at a pace of just 0.6 percent. Economists think growth could be even
slower in the current quarter. Some believe the economy is actually
shrinking now.
The Federal Reserve, which started cutting a key interest rate in
September, recently ramped up reductions to shore up the economy. It
slashed rates by an aggressive 1.25 percentage points in the span of
just eight days in January. Mr. Bernanke last week signaled the
central bank stands ready to lower rates again at its next meeting on
March 18.
Even as the Fed fights to keep the economy going, it is keeping a
sharp eye on inflation. Galloping energy prices, rising food costs and
high prices elsewhere are straining pocketbooks and putting a further
damper on economic growth.
Some worry that the country could be headed for a bout of stagflation
-- a dangerous mix of stagnant economic activity and stubborn
inflation. But Mr. Bernanke, in his congressional appearance last
week, said he didn't believe that was the case. |
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