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U.S. factory orders pull back slightly, service sector accelerates

Christian Fernsby ▼ | January 8, 2020
A report released by the Commerce Department showed a pullback in new orders for U.S. manufactured goods in the month of November.
U.S. factory workers
American economy   U.S. factory workers
The Commerce Department said factory orders fell by 0.7 percent in November after inching up by a downwardly revised 0.2 percent in October.

Topics: U.S. factory service

Economists had expected orders to drop by 0.8 percent compared to the 0.3 percent increase originally reported for the previous month.

The report said durable goods orders tumbled by 2.1 percent in November after edging up by 0.2 percent in October, reflecting a modest revision from the previously reported 2.0 percent slump.

The nosedive in durable goods orders was partly offset by a continued increase in orders for non-durable goods, which climbed by 0.6 percent in November after rising by 0.3 percent in October.

The Commerce Department said shipments of manufactured goods rose by 0.3 percent in November following a 0.1 percent uptick in October. Inventories also increased by 0.3 percent.

Subsequently, the Commerce Department said the inventories-to-shipments ratio in November was unchanged from the previous month at 1.40.

Service sector activity in the U.S. grew at a faster than expected pace in the month of December, the Institute for Supply Management revealed in a report on Tuesday.

The ISM said its non-manufacturing index climbed to 55.0 in December after dipping to 53.9 in November, with a reading above 50 indicating growth in the service sector. Economists had expected the index to inch up to 54.5.

"The non-manufacturing sector had an uptick in growth in December," said Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee.

"The respondents are positive about the potential resolution on tariffs," he added. "Capacity constraints have eased a bit; however, respondents continue to have difficulty with labor resources."

The bigger than expected rebound by the headline index reflected a substantial acceleration in the pace of growth in business activity, with the business activity index spiking to 57.2 in December from 51.6 in November.

On the other hand, the report said the new orders index slid to 54.9 in December from 57.1 in November, indicating a slowdown in the pace of growth in new orders.

The employment index also edged down to 55.2 in December from 55.5 in November, suggesting the pace of job growth in the service sector slowed slightly during the month.

Meanwhile, the prices index came in unchanged from the previous month at 58.5, pointing to the 31st consecutive month of price growth.

The ISM released a separate report last Friday showing U.S. manufacturing activity unexpectedly contracted at a faster rate in the month of December.

The purchasing managers index slid to 47.2 in December from 48.1 in November, with a reading below 50 indicating a contraction in manufacturing activity.

The modest decrease came as a surprise to economists, who had expected the manufacturing index to inch up to 49.0.

With the unexpected drop, the index pointed to the fastest rate of contraction in manufacturing activity since June of 2009.