Manufacturing sector gets needed boost in December

Associated Press

WASHINGTON — Stronger demand for semiconductors, household appliances and machinery helped lift factory orders in December, suggesting the nation’s beleaguered manufacturers may be coming out of their long slump.

After falling by 4.3 percent in November, orders to U.S. factories for manufactured goods rose by 1.2 percent in December, the second increase in the last three months, the Commerce Department reported Tuesday.

Manufacturers have been mired in a slump for the last year and a half and have been hardest hit by the recession that hit the national economy in March. To cope, they have sharply cut production, trimmed hours and laid off workers. Last year, factories shed 1.3 million jobs, or about 7 percent of their workforce.

But Tuesday’s report "suggests that the manufacturing recession has bottomed, and the light at the end of the 18-month-long tunnel is getting brighter," said Richard Yamarone, economist with Argus Research Corp.

The latest snapshot of industrial activity, taken with other recent data, indicates the worst of the recession may be over for manufacturers, economists said.

The Institute for Supply Management reported last week that its index of business activity edged higher in January. The government reported last week that durable goods orders to factories rose by 2 percent in December, greater than expected.

"While I would not bet the house on a manufacturing recovery in the first quarter, the odds are clearly moving in that direction," said David Huether, chief economist for the National Association of Manufacturers. "Since we are in an investment-led recession the outlook for durable goods is a reliable indicator of the path of recovery."

Before manufacturing can fully recover, though, businesses will have to crank up investment again, and foreign companies and consumers must increase their spending on American-made goods, which would boost U.S. exports, economists said.

"For the factory sector to really get moving again, we have to have a renaissance of business investment, which tends to lag the economy and doesn’t tend to suddenly spring to life," said economist Clifford Waldman of Waldman Associates.

In December, orders for the category that includes computers and electronics products rose by 3.1 percent, on top of a 0.8 percent gain in November.

After falling by 3.7 percent in November, semiconductors posted a strong 12.7 percent increase, a good sign for the high-tech sector, which took a big hit when companies scaled back capital spending in response to the economic slump.

Orders for household appliances rose by 2.8 percent in December, following a 6.3 percent advance; orders for electrical lighting equipment rose by 2.5 percent, after falling by 7.4 percent in November.

Orders for machinery increased 0.8 percent, on top of a 2 percent rise.

For transportation equipment, orders grew by 3.6 percent, after plunging by 20 percent the month before. December’s increase was mostly due to orders for missiles and space equipment, the government said. Orders for cars dipped by 0.2 percent in December as free financing and other incentives waned.