Factory Order Decline Is 1st in 3 Months

Factory orders fell for the first time in three months in November, the Commerce Department said Tuesday, partially reversing a strong showing in the previous month but doing little to convince analysts that the economy is turning weaker.

The department said orders fell 0.4% to a seasonally adjusted annual rate of $320.5 billion after rising a revised 1.1% in October.

But shipments of finished products, order backlogs and inventories continued to rise, the department said, suggesting underlying strength in the industrial sector toward the end of last year, analysts said.

The department said shipments rose 0.9% and that unfilled orders and inventories were up 0.4%.

“Shipments and inventories were on the strong side,” said economist Russell Sheldon of Mellon Bank, “suggesting the fourth quarter may be stronger than most people are saying.”

He said the buildup in inventories by itself could have suggested that demand had fallen off, but the fact that shipments were strong made that possibility unlikely.

“They are accumulating inventory because they think they have the customers,” Sheldon said.

The economy in recent weeks sent out some signals that it might have been growing stronger as 1996 drew to a close, raising concerns among some on Wall Street that the Federal Reserve Board might intervene to slow the pace by raising interest rates.

But the stock market has generally brushed off this threat. Investors pushed the Dow Jones industrial average to its first close above 6,600 on Tuesday, and bond yields rose slightly.

The Commerce Department previously said October factory orders had risen 0.9%. Wall Street analysts had forecast a decline of 0.6% for November.

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Factory Orders

Total new orders, in billions of dollars, seasonally adjusted:

November, 1996: $320.5

Source: Commerce Department