Orders to U.S. factories for "big ticket" manufactured goods plunged 3.2% in June, the government said today.
The Commerce Department said demand for durable goods, items expected to last three or more years, suffered a May-to-June decline of $4.14 billion to a seasonally adjusted $124.69 billion last month.
The report caught analysts by surprise. They had been expecting a healthy increase following on the heels of a 4.2% rise in May.
The decline, the third in the last six months, served to emphasize the problems besetting the U.S. manufacturing sector.
In another economic report today, a real estate trade group reported that sales of existing homes in June posted their first increase since last September.
The National Assn. of Realtors said sales of existing single-family homes, bolstered by falling mortgage rates, rose a modest 1.2% to a seasonally adjusted annual rate of 3.34 million units.
Durable goods orders are considered a key signpost for the future since a drop in orders normally triggers cutbacks in production plans and job layoffs.
The 3.2% June decline was the weakest performance since a 4.1% drop in April. Orders had fallen 10.5% in January, the biggest drop on record.
For the first six months of the year, orders totaled $744.7 billion, 1.5% below the same period in 1989, indicating how sluggish demand has been this year. In fact, the monthly level of $124.69 billion in orders was 5.6% below the record level of orders reached more than two years ago.
The June weakness was widespread across all industry groups. About half of the decline was attributed to a 20.7% drop in orders for military hardware, the biggest setback in the defense category since a 33.6% drop in January.
The military sector tends to be extremely volatile, depending on the timing of government contracts.
But even without the big defense decrease, durable goods orders would have been down 1.7%.
Orders in the key category of non-defense capital goods, considered a good barometer of businesses' plans to expand and modernize, were up a small 0.3% after declines of 1.4% in May and 10.6% in April.
The largest industry decline came in transportation, down 4.8% to $33.8 billion. Most of this decline came in aircraft orders.
Electrical machinery was down 3.9% to $19.9 billion with electronic components accounting for most of the decrease.
The machinery category, which includes computers, fell 3.2% to $21.7 billion.
Orders for primary metals such as steel fell 4.9% to $11.3 billion.