Durable Goods Orders Off 2.6%

Orders for “big ticket” durable goods, hurt by a steep decline in demand for defense equipment, fell 2.6% in August for the biggest setback in five months, the government said Tuesday.

The Commerce Department said orders for items expected to last three or more years totaled $103.4 billion in August, $2.8 billion below July’s level. Orders had risen 3.4% in July and 0.1% in June.

The weakness last month was attributed to a 24.5% drop in defense orders, which fell to $7.7 billion in August after having risen 40% in July. But even without the weakness in defense, orders would have declined 0.3%.

When orders rose in both June and July, some analysts contended that the worst might be over in smokestack America.

Lawrence Chimerine, president of Chase Econometrics, an economic forecasting firm in Bala Cynwyd, Pa., said the August decline in orders showed that domestic manufacturers are still suffering from stiff import competition.

“What is happening is the same old story: Orders are essentially flat, and this is accurately measuring what is going on in the economy,” he said. “There has been no major acceleration yet.”

The August drop in orders for durable goods was the biggest decline since a 2.7% fall in March.

Orders in the category of non-defense capital goods fell 2.8% last month following a 3.7% increase in July. This category is closely watched for signals of industry intentions to expand and modernize production facilities. But with American industry operating at only 79% of capacity last month, analysts said there is plenty of excess capacity and no incentive for capital investment.

Within major industries, orders for transportation equipment fell 8.4%, to $26 billion, in August. Two-thirds of the decline came in the aircraft industry as both defense and civilian demand dropped. Orders for machinery fell 3.7%, to $32.9 billion, with most of the decline coming in electrical machinery.