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Factory orders rise but picture is far from rosy

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Associated Press / January 4, 2008

WASHINGTON - Orders to US factories jumped in November by the largest amount in four months. The increase was driven by higher oil prices and was not viewed as a sign of any newfound strength in manufacturing.

The Commerce Department said yesterday that orders for manufactured goods rose 1.5 percent, the biggest rise since a 3.4 percent surge in July.

But all the strength came in demand for nondurable goods, which shot up 3 percent, reflecting higher oil prices. Orders for durable goods, everything from appliances to autos, fell 0.1 percent, the fourth straight monthly decline.

Analysts said the drop in durable goods reflected the problems facing factories. On Wednesday, the Institute for Supply Management reported that its closely watched manufacturing gauge plunged to 47.7 in December, the lowest reading since spring 2003, after the invasion of Iraq. Any reading below 50 is a sign that manufacturing is contracting.

The report on factory orders showed demand for nondefense capital goods excluding aircraft, a category that's closely watched as a signal of business investment plans, fell for a second straight month, dropping 0.1 percent after an even bigger 3 percent fall in October. The concern is that housing and credit woes are causing businesses to turn much more cautious.

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