Ahead of the Bell: Factory Orders

WASHINGTON - Wall Street expects factory orders fell sharply in October as the economy slid deeper into recession.

The expectation is that orders for both durable goods and nondurable goods dropped by 4 percent in October, according to the consensus of Wall Street economists surveyed by Thomson Reuters.

That decline would be much bigger than the 2.5 percent fall in factory orders that occurred in September. The Commerce Department report on factory orders will be released Thursday at 8:30 a.m. EST.

A preliminary report that looked just at durable goods, items expected to last at least three years, showed them plunging by 6.2 percent in October, more than double the amount that economists expected. It was the biggest one-month fall in two years.

The manufacturing sector, like the rest of the economy, is being hammered by the recession that began in December 2007. The downturn has already lasted 12 months, making it the longest slump in a quarter-century with many economists forecasting that it will not end until the middle of next year.

Manufacturing outside of autos initially had not fared as badly as domestic firms were bolstered by strong export sales. However, as the weakness in the U.S. has spread to other countries, demand for exports has begun to falter.

The auto companies have been in a prolonged slide, reflecting not only the weak economy but the huge jump in gasoline prices earlier in the year. Even though gas prices have retreated from their highs above $4 per gallon this summer, car sales have remained depressed, reflecting rising unemployment and the severe credit crisis which hit in September, making it harder to get auto loans.

U.S. auto sales plunged by 37 percent in November to their worst level in more than 26 years, adding more ammunition to Detroit automakers' case for a congressional lifeline that they will press again for on Thursday.

Every major automaker reported a year-over-year sales decline of more than 30 percent on Tuesday with the Detroit carmakers among the worst hit. Sales at General Motors Corp. fell by 41 percent, Chrysler LLC's sales dropped by 47 percent and Ford Motor Co. saw a 31 percent drop.

Their overseas rivals posted abysmal results as well with Toyota Motor Corp. sales down 34 percent, Nissan Motor Co. off 42 percent and Honda Motor Co. down 32 percent.

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