Washington, Feb. 4 (Bloomberg) -- U.S. factory orders probably rose in December as manufacturing picked up to meet demand, economists said in advance of a government report today. More orders for defense equipment and for non-durable goods probably fueled a 0.3 percent increase to $320.2 billion during the month, based on the median of 64 forecasts in a Bloomberg News survey. That would follow a 0.8 percent drop in November that was the third decline in four months. Bookings are picking up because many customers let inventories dwindle in the final three months of 2002 amid concern that sales growth would falter. With demand holding up, companies have to place more orders to keep shelves stocked.
``It does look as if manufacturing is staging something of a comeback after the soft spot that we saw in the fall,'' said Ken Mayland, president of ClearView Economics in Pepper Pike, Ohio, who correctly predicted that the economy would slow starting in mid-2000 because inventories had become bloated. ``Inventories are quite lean, and that creates an imperative to order and produce.'' The Commerce Department releases the report at 10 a.m. Washington time. Manufacturing, which accounts for about a seventh of the economy, led the U.S. into a recession in 2001 and is helping support the recovery. The report comes a day after a separate report showed that manufacturing expanded in January for a third straight month. The Institute for Supply Management's factory index was 53.9 compared with 55.2 in December. The index has been higher than 50, signaling improving business conditions, since November.
Durable Goods Orders
An increase in December factory orders is expected because a separate government report already showed that durable goods orders rose 0.2 percent for the month. At the same time, economists expect that bookings for non-durable goods, which make up half of the report, gained during the month. The main threat to manufacturing is the possibility of a war in Iraq, which has made many executives skittish about spending. Applied Materials Inc., the world's biggest maker of computer-chip production equipment, last week said that orders sank 35 percent in the quarter that ended Jan. 26. The company attributed the decline partly to military tensions around the globe. ``Due to ongoing economic weakness and geopolitical uncertainties, customers deferred capital expenditures, causing a larger order shortfall than expected,'' said James C. Morgan, chairman and chief executive officer of Applied Materials, in a statement. *T //www.quote.bloomberg.com