Washington, Nov. 4 (Bloomberg) -- U.S. factory order books are becoming thin, a government report today will probably show, and with consumers cautious about spending the Federal Reserve is likely to lower interest rates this week, economists said. Rising U.S. joblessness and dwindling consumer confidence are adding to investor and business concern that the recovery is faltering. Reports this week from Germany are expected to offer evidence of rising unemployment, falling factory orders and declining services, signs Europe's largest economy is also weakening.
Fed policy makers may come to the U.S. economy's aid on Wednesday with a quarter-point reduction in the overnight bank lending rate, currently at a 41-year low of 1.75 percent. ``Lower interest rates are keeping the economy from going down the drain,'' said Mark Vitner, a senior economist at Wachovia Securities Inc. in Charlotte. A rate cut ``will reduce borrowing costs for people and firms that have a lot of debt.''
A Bloomberg survey of 128 economists found 79 forecast the Fed's rate-setting Open Market Committee will lower rates when it meets on Wednesday, the day after U.S. congressional elections. Of those surveyed, 62 expect a quarter-point reduction to 1,50 percent and 17 forecast a half-point cut. The Institute for Supply Management, an organization of purchasing executives, will probably report that services expanded in October at a slower pace than in September. The group reported on Friday that its manufacturing index showed a second straight month of contraction in October.
A Bloomberg News survey predicts the companion non- manufacturing survey to be released on Tuesday will decline to 52 from 53.9. Readings above 50 signals more companies report their business expanded, while those below 50 point to declines. //www.quote.bloomberg.com