New orders for U.S. factory goods fell for a second straight month in September as the manufacturing sector continues to struggle under the weight of a strong dollar and deep spending cuts by energy companies.
The Commerce Department said on Tuesday new orders for manufactured goods declined 1.0 percent after a downwardly revised 2.1 percent drop in August.
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Factory activity, which accounts for about 12 percent of the economy, is also being constrained by efforts by businesses to reduce an inventory overhang and tepid global demand. But the worst could be over for the sector after a report on Monday showed new orders rose in October for the first time since July.
Economists polled by Reuters had forecast factory orders falling 0.9 percent in September after a previously reported 1.7 percent decline in August.
The dollar has gained 16.8 percent against the currencies of the United States' main trading partners since June 2014, which has undercut export growth and weighed on the profits of multinationals.
Orders for transportation equipment fell 3.1 percent in September, largely reflecting a drop in aircraft orders. Motor vehicle production remains a bright spot in manufacturing, with orders for automobiles and parts rising 1.5 percent in September.
The Commerce Department also said orders for non-defense capital goods excluding aircraft - seen as a measure of business confidence and spending plans - slipped 0.1 percent instead of the 0.3 percent drop reported last month. This also supports the view that the worst of the manufacturing slump might be over.
Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, increased 0.5 percent in September as reported last month.
Inventories of factory goods fell 0.4 percent after a similar drop in August, also an encouraging sign for the sector. That left the inventories-to-shipments ratio unchanged at a still lofty 1.35.
Unfilled orders at factories fell for a second straight month.
(Reporting By Lucia Mutikani; Editing by Andrea Ricci)