01/06/2015 10:28 EST | Updated 03/08/2015 05:59 EDT

US factory orders in November fell for fourth month; key investment category also down

WASHINGTON - Orders to U.S. factories fell for a fourth straight month in November, with demand in a key category that signals business investment plans down for a third month.

The Commerce Department said Tuesday factory orders dropped 0.7 per cent in November after a similar 0.7 per cent fall in October. The November weakness came from decreases in demand for primary metals, industrial machinery and military aircraft.

A closely watched category that serves as a proxy for business investment spending dropped 0.5 per cent in November, marking the longest stretch of weakness in this category since 2012.

Economists, however, remain optimistic that the drop in orders is a temporary soft patch and a stronger economy with increased consumer spending will trigger a rebound in demand in 2015.

Demand for durable goods, items expected to last at least three years, fell 0.9 per cent in November, the third drop in the past four months. Demand for nondurable goods such as petroleum, chemicals and paper declined 0.5 per cent.

The overall weakness was led by a big drop of 11.1 per cent in orders for military equipment, a volatile category that had shown a big 20.2 per cent surge in October.

Demand for transportation equipment fell 1.3 per cent in November, though orders for commercial aircraft and autos both rose. However, the overall transportation category was held back by a 7.4 per cent fall in demand for military aircraft.

Total factory orders fell to a seasonally adjusted $492.7 billion in November. Orders for the first 11 months of 2014 were 3.4 per cent higher than the same period in 2013.

The recent weakness in factory orders contrasts with an otherwise strong year for manufacturing, driven in part by strong auto sales.

Auto sales are expected to reach their highest level in a decade this year, bolstered by strong job gains and cheap gas.

The Federal Reserve reported that factory production rose 1.1 per cent in November and is now up 4.8 per cent over the past 12 months. That puts production above the previous high set just before the start of the Great Recession in December 2007.