August Manufacturing Orders Show Economy Stuck in Low Gear

By October 4, 2010Economy

New orders for manufactured goods edged down 0.5 percent in August, the Commerce Department reported today.  After growing faster than the overall economy during the first year of the recovery, manufacturing has clearly downshifted into low gear.

Today’s report marks the second decline in factory orders in the past three months.  Much of the overall August decline was due to a 40.2 percent plunge in volatile non-defense aircraft orders, which tend to fluctuate from month-to-month.

Orders in the rest of manufacturing actually rose 0.4 percent in August, due chiefly to rebounds in machinery, computers and electronic products. But even with these increases, orders in these areas have slowed considerably from earlier in 2010, signaling that business investment will not likely continue to be the catalyst for economic growth as it was in the second quarter of the year.

Continued declines in new orders for construction materials and supplies and consumer goods show that housing and consumer spending have similarly weakened now that much of the temporary boost from several fiscal stimulus measures has ended.

The weak status of the labor market and increased uncertainty – stemming from possible federal tax and regulatory changes that are looming – will likely weigh down the recovery going forward.

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