Durable Goods Orders Off 0.8% in April

Orders to U.S. factories for big ticket durable goods fell for the third straight month in April, skidding 0.8%, the Commerce Department said Thursday.

Commerce Secretary Malcolm Baldrige attributed the drop mostly to a 27.2% decline in defense orders, which are extremely volatile on a monthly basis. If defense orders were excluded, new orders would have increased 2.1%.

Nevertheless, private economists called it a weak performance and a big disappointment.

Several analysts pointed to a 3.7% drop in non-defense capital goods--items such as computers and machinery purchased by businesses--as a possible indication of business leaders’ nervousness about the overall economy for the rest of the year.

The category, closely watched for signals that it can give about industry plans to expand and modernize production facilities, has been extremely volatile this year.

Baldrige said orders rose for motor vehicles and auto parts and for products related to housing activity.

“Though durable-goods production has not yet picked up, the housing sector and financial markets continue to signal faster economic growth,” he said a statement.

But analyst Michael K. Evans of Evans Economics in Washington said: “The figures certainly are not very bullish. The biggest disappointment is non-defense goods--an important number.”

Evans said the larger picture “clearly suggests that firms are very nervous about investing for the rest of the year, particularly in view of the (potential) retroactive cancellation of the investment tax credit.”

The tax overhaul bill approved by the Senate Finance Committee would repeal the investment credit retroactively to Jan. 1, 1986. Under the credit, the government in effect pays up to 10% of the cost of machinery and equipment.

Orders for durable goods, items expected to last at least three years, totaled $104.3 billion in April, compared to $105.2 billion in March.

Orders for defense capital goods declined $2.8 billion, or 27.2%, to $7.6 billion, but the $10.4-billion level in March was unusually high, the government said.

Analyst John Hagens with Chase Econometrics in Bala Cynwyd, Pa., said that judging from the new data, he sees no rebound yet. He said one reason for the weakness in durable-goods orders was because of cutbacks in capital spending by hard-pressed oil producers.