Wednesday, April 2, 2008

Factory orders tumble for second month

WASHINGTON — Orders to U.S. factories fell for a second month, a worse-than-expected performance that reinforced worries that the risk of recession is rising.
The Commerce Department reported Wednesday that factory orders dropped 1.3% in February, about double the downturn that economists had been expecting. Orders had fallen an even bigger 2.3% in January, the largest decline in five months.

The falloff in demand was widespread, with steep declines in orders for motor vehicles, various types of heavy machinery and demand for iron and steel.

BERNANKE: No growth possible for first half 2008

Many economists believe a prolonged housing slowdown and credit crunch have already pushed the country into a recession. Federal Reserve Chairman Ben Bernanke, testifying before the Joint Economic Committee on Wednesday, said that the economy could shrink over the first half of this year, his most pessimistic assessment to date.

"It now appears likely that gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly," Bernanke told lawmakers. Under one rule, six straight months of declining GDP would constitute a recession.

Bernanke said he still expects economic growth to strengthen in the second half of the year but he said, "In light of the recent turbulence in financial markets, the uncertainty attending this forecast is quite high and the risks remain to the downside."

The report on factory orders showed demand falling 1.1% for durable goods, items expected to last at least three years, while orders for non-durable goods, products such as oil and chemicals, fell 1.5%.

The weakness in manufacturing occurred even though orders for commercial airplanes rose by 5.1% in February, rebounding from a big decline in January. Orders for motor vehicles fell 2% in February after no gain in January. Automakers are struggling with weak demand in the face of soaring gasoline prices.

Overall, orders for transportation products posted a 1.8% rise in February as the strength in commercial and defense aircraft orders as well as higher demand for ships and boats offset the drop in motor vehicles.

Orders for heavy machinery plunged 12.3% in February, the biggest decline since January 2004, while orders for iron and steel fell 2.3%.

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