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U.S. factory orders fall as machinery, transportation weigh

WASHINGTON, Jan 7 (Reuters) - New orders for U.S.-made goods fell in November, pulled down by steep declines in demand for machinery and transportation equipment, pointing to sustained weakness in manufacturing despite an easing in trade tensions between Washington and Beijing.

Factory goods orders dropped 0.7%, the Commerce Department said on Tuesday. Data for October was revised down to show orders rising 0.2% instead of increasing 0.3% as previously reported. Economists polled by Reuters had forecast factory orders falling 0.8% in November.

Factory orders dropped 0.7% compared to November 2018.

Though Washington and Beijing in December hammered out a "Phase 1" trade deal, business confidence has remained depressed amid considerable confusion about the details of the agreement. President Donald Trump said last Tuesday that the partial deal would be signed on Jan. 15 at the White House.

A survey last week from the Institute for Supply Management showed its measure of national factory activity dropping in December to its lowest level since June 2009. The index has contracted for five straight months. Weak business sentiment has hurt capital expenditure, pushing manufacturing into recession.

Manufacturing, which accounts for 11% of the economy, also has been hampered by an inventory overhang. Further strain is expected, with Boeing suspending production of its fast-selling 737 MAX plane, beginning this month, after two fatal crashes in Indonesia and Ethiopia.

Transportation equipment orders dropped 5.9% in November after being unchanged in the prior month. Orders for civilian aircraft and parts fell 2.2%, while those for defense aircraft plunged 72.9%. Machinery orders fell 1.2% in November after gaining 0.8% in October. But orders for electrical equipment, appliances and components rose 2.0%.

Shipments of manufactured goods rose 0.3% in November after edging up 0.1% in the prior month. Unfilled orders at factories fell 0.4% after being unchanged in October. Inventories increased 0.3% in November after rising 0.2% in October.

The government also said November orders for non-defense capital goods excluding aircraft, which are seen as a measure of business spending plans on equipment, gained 0.2% instead of edging up 0.1% as reported last month.

Shipments of core capital goods, which are used to calculate business equipment spending in the gross domestic product report, fell 0.3% in November as previously reported. (Reporting By Lucia Mutikani; Editing by Andrea Ricci)