US factory orders dropped for the second straight month in September as businesses cut back on purchases of steel, computers and other equipment amid the economic downturn, the government said Tuesday. The Commerce Department said factory orders fell by 2.5 percent from August, much worse than the 0.7 percent drop analysts expected. That's on top of a revised 4.3 percent decline in August. Excluding autos and aircraft, orders fell 3.7 percent, the steepest drop since 1992 when the department began tracking sector-specific changes. Orders for non-defense capital goods excluding aircraft, considered a good indication of business investment plans, fell by 1.5 percent. That follows a 2.3 percent drop in August and indicates companies are cutting back on investments, likely due to the economic downturn and difficulty getting credit. The Commerce Department said last week that the economy contracted at an annual rate of 0.3 percent in the third quarter. Consumer spending fell 3.1 percent in the July-September period, its first drop in 17 years and steepest fall since 1980.Businesses also cut back, reducing their spending on equipment at a 5.5 percent pace. Orders for autos and auto parts recovered somewhat, increasing by 2.7 percent, after plummeting 10.6 percent in August, the department said. Still, automakers had two disastrous months in September and October. The reluctance of banks to lend has hurt automakers by making it difficult for potential buyers to get auto loans. According to October sales data released Monday, sales sank 45 percent at General Motors Corp., 30 percent at Ford, 25 percent at Honda Motor Co. and 23 percent at Toyota. Ford Motor Co., Toyota Motor Corp., Chrysler LLC and Nissan reported sales drops of more than 30 percent in September.
