Factory orders climb


Published: Wednesday, January 30, 2008 at 6:01 a.m.
Last Modified: Tuesday, January 29, 2008 at 7:06 p.m.

NEW YORK - Orders to factories for big-ticket manufactured goods jumped unexpectedly in December, good news amid signs that the U.S. economy may be tipping toward a recession.

Still, analysts said the 5.2 percent growth in orders likely came from overseas demand and that domestic growth faced continuing threats from tight credit and mortgage markets that have forced consumers to retrench.

The Conference Board report Tuesday that consumer confidence fell sharply in January on worries over deteriorating business conditions and a weakening job market gave another sign of consumer angst.

The New York-based business research group said that its Consumer Confidence Index dropped to 87.9 in January from a revised 90.6 in December. That put it back to about where it was in November, when it registered 87.8. The January reading was just a tad below the 88 expected by Wall Street analysts, according to Thomson/IFR.

Meanwhile, a key index that tracks home prices plunged a record 8.4 percent in November.

The drop in the Standard & Poor's/Case-Shiller 10-city composite home price index was the 11th straight monthly decline and the biggest year-to-year drop since a 6.7 percent decrease in October.

While acknowledging that the factory orders report was a positive sign, economists worried that it would be misinterpreted as signaling greater strength than exists.

"So make no mistake: The U.S. economy remains under severe stress,'' said Bernard Baumohl, managing director of the Economic Outlook Group, in a research note. "When you have more than 70 percent of the economy (consumers) in retrenchment mode and a banking sector shutting down the lending window, the prospects of a recession are still very real.''

David Huether, chief economist of the National Association of Manufacturers worried that the downturn in housing would hurt the economy.

"This is why immediate action from Capitol Hill on an economic stimulus package is needed to encourage both consumer spending and business investment,'' Huether said

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