By Timothy R. Homan
Oct. 2 (Bloomberg) -- Orders to U.S. factories probably decreased in August by the most in a year as tight credit conditions and slowing sales forced companies to cut back, economists said before a government report today.
Bookings dropped 3 percent, the most since August 2007, after advancing 1.3 percent in July, according to the median forecast in a Bloomberg News survey. A separate report may show the number of Americans seeking unemployment benefits is at a level that signals the job market has deteriorated.
Banks have become reluctant to lend as losses mount, making it harder for companies to obtain the financing needed to investment in new equipment. Exports, which had made up for a slowdown in U.S. sales, are likely to weaken in coming months as growth in Europe and Japan also falters.
``The credit crunch is hitting home as the manufacturing sector has taken a major turn for the worse,'' said Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania. ``The economy may be starting to unravel.''
The Commerce Department's factory orders report is due at 10 a.m. in Washington. Estimates in the survey of 59 economists ranged from a drop of 6 percent to a 0.5 percent increase.
A Labor Department report at 8:30 a.m. may show the number of first-time claims for unemployment benefits last week fell to 475,000 from 493,000 the previous week as job losses related to the Gulf Coast hurricanes subsided, according to a Bloomberg survey median.
Still, 452,000 workers a week on average have filed applications for benefits in the last two months, up from 367,000 in the first seven months of the year.
Durables Demand
Orders for durable goods, which comprise about half of factory orders, fell 4.5 percent in August after a gain of 0.8 percent the previous month, the Commerce Department said last week. Excluding transportation equipment, bookings dropped 3 percent after a 0.1 percent increase in July.
A private report yesterday showed the slump may have worsened last month. Manufacturing contracted in September at the fastest pace since the 2001 recession, according to the Institute for Supply Management. Orders, production and employment all dropped and exports rose at the slowest pace in two years.
The slowdown in overseas demand threatens to undermine one of the last remaining bright spots for the economy. A narrowing of the trade gap last quarter added 2.9 percentage points to growth, the biggest contribution since 1980, the Commerce Department said last month.
Lift from Trade
Excluding trade, the economy would have contracted at a 0.1 percent pace from April through June, instead of the 2.8 percent pace of expansion.
Business spending on new equipment and software dropped at a 5 percent annual pace during the second quarter, the most in six years, Commerce also said.
A slowdown in factory orders is forcing some companies to trim payrolls. Rockwell Automation Inc., the world's largest maker of factory automation products, said this week it will cut about 3 percent of its 20,000-member workforce immediately to reduce costs.
Keith Nosbusch, chief executive officer of the Milwaukee- based company, said in July that slower demand hurt profit for the quarter ended June 30.
Bloomberg Survey
=============================================
Initial Factory
Claims Orders
,000's MOM%
=============================================
Date of Release 10/02 10/02
Observation Period Sept. 27 Jan.
---------------------------------------------
Median 475 -3.0%
Average 471 -2.7%
High Forecast 525 0.5%
Low Forecast 432 -6.0%
Number of Participants 39 59
Previous 493 1.3%
---------------------------------------------
4CAST Ltd. 460 ---
Action Economics 490 -3.0%
Aletti Gestielle SGR --- -1.6%
Argus Research Corp. --- 0.3%
Banc of America Securitie --- -2.6%
Bank of Tokyo- Mitsubishi 490 -2.0%
Barclays Capital 490 -3.0%
BBVA 463 ---
BMO Capital Markets 470 -2.8%
BNP Paribas 460 -1.5%
Briefing.com 440 -2.0%
Calyon --- -3.2%
CIBC World Markets --- -4.5%
Commerzbank AG 460 -1.5%
Credit Suisse 475 ---
Daiwa Securities America --- -3.0%
DekaBank --- -3.0%
Desjardins Group 483 -2.2%
Deutsche Bank Securities 475 -3.0%
Dresdner Kleinwort --- -3.0%
DZ Bank --- -3.2%
First Trust Advisors 479 -3.1%
Fortis --- -2.0%
Goldman, Sachs & Co. --- -3.0%
H&R Block Financial Advis 460 -2.4%
High Frequency Economics 475 -3.0%
HSBC Markets 450 -2.6%
IDEAglobal 485 -2.0%
ING Financial Markets 480 -3.0%
Insight Economics 475 -2.8%
J.P. Morgan Chase 485 -2.8%
Janney Montgomery Scott L --- -3.4%
JPMorgan Private Client 475 -2.3%
Landesbank Berlin 475 -3.2%
Landesbank BW --- -2.0%
Lehman Brothers --- -2.0%
Lloyds TSB 432 -1.6%
Maria Fiorini Ramirez Inc 480 -3.5%
Merk Investments --- -1.7%
Merrill Lynch 470 -3.0%
MFC Global Investment Man 480 -3.0%
Moody's Economy.com 480 -4.5%
Morgan Keegan & Co. --- -2.3%
Morgan Stanley & Co. --- -3.5%
National City Corporation --- -2.2%
Newedge --- -4.0%
Nomura Securities Intl. --- -3.0%
PNC Bank --- -3.0%
RBS Greenwich Capital --- -3.1%
Ried, Thunberg & Co. 525 -3.0%
Schneider Trading Associa 436 -2.5%
Scotia Capital 455 -2.3%
Societe Generale --- -3.0%
Stone & McCarthy Research 440 -2.7%
TD Securities 450 ---
Thomson Financial/IFR 465 -3.3%
Tullett Prebon 465 -3.0%
UBS Securities LLC 470 -3.0%
Unicredit MIB 445 ---
University of Maryland --- 0.5%
Wachovia Corp. --- -1.9%
Wells Fargo & Co. 490 -3.0%
WestLB AG --- -2.0%
Westpac Banking Co. 460 -6.0%
Wrightson Associates 525 ---
=============================================
To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
Thursday, October 2, 2008
U.S. Factory Orders in August Probably Fell Amid Tight Credit
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