Factory orders fall to seven-month low

WASHINGTON - Orders to factories fell in August by the largest amount in seven months, reflecting weakness across a wide swath of manufacturing as the turbulent financial market made businesses more cautious.

The Commerce Department said orders dropped 3.3 percent in August, even worse than the expected 2.8 percent decline. It was the biggest setback since orders fell 4.2 percent in January.

Demand for commercial aircraft fell 39.9 percent, leading the decline. Orders also were weak for other industries, from autos and home appliances to industrial machinery and steel.

Orders for durable goods, which are items expected to last at least three years, fell 4.9 percent. Demand for nondurable goods, such as food, clothing, and gasoline, declined 1.6 percent.

In a troublesome sign, business demand for nondefense capital goods excluding aircraft - considered a good gauge for investment plans - dropped 0.5 percent in August.

This decline was blamed partly on greater caution by businesses in the face of the credit crunch, which caused stock market turbulence in late summer.

The drop in factory orders included big declines in two industries affected by housing market woes. Demand for home appliances fell 7.2 percent and orders for furniture slipped 4.4 percent.

Some economists are worried that the steepest housing slump in 16 years and the biggest credit crunch in nearly a decade could push the country into a full-blown recession.

In other news, the Labor Department said the number of newly laid off workers filing claims for unemployment benefits rose 16,000 to 317,000. It was the largest one-week rise in four months.

While the increase was bigger than had been expected, analysts said it followed two weeks in which claims had fallen, leaving the weekly number little changed over the past month.