There is no doubt that the world's largest economy is showing signs of a slow down, as the latest figures from the US commerce department show.

According to the data, US factory orders showed the sharpest decline in six-and-a-half years in January 2007. The decline in orders by 8.7 per cent for orders for big-ticket items was worse than an earlier estimate of 7.8 per cent.

The data showed that a major contributor to the manufacturing slowdown was a 19-per cent decline in transportation orders, including a 60.2-per cent drop in demand for commercial planes.

While durable goods fell 8.7 per cent, order for non-durable goods including petrol and food, were down only 2 per cent in January.

At the same time official US labour department data showed that productivity gains in the US had declined while labour costs soared. While hourly productivity per worker over a three-month period grew by 1.6 per cent annually, it led to a rise in unit labour costs of 6.6 per cent, exceeding the projected increase of 1.7 per cent.

Analysts say a combination of slowing productivity coupled with higher wages reflects a clear indication of a slowdown in the world's largest economy and could fuel inflation if sustained.

The economic data comes on the heels of figures showing economic growth in the last three months of 2006 at 2.2 per cent, well below the original estimate of 3.5 per cent.