Durable Orders Fall 2.6% in May on Asian Woes

Orders for big-ticket manufactured goods fell sharply in May, the government said Wednesday in a report that surprised economists and offered fresh evidence of Asia’s impact on the nation’s economy.

The Commerce Department said orders for durable goods such as washing machines, cars and aircraft fell 2.6% in May to a seasonally adjusted $184.3 billion.

That was much steeper than the 0.7% decline forecast by private economists, who said the report reflected a drop in sales to Asia caused by the region’s financial turmoil.

“The report was a surprise because it showed the weakness was fairly widespread,” said Debbie Johnson, senior economist at Deutsche Bank Securities. “We are starting to see a slowing of industrial activity, and the Asian situation is probably impacting that.”

The May drop in orders followed a 1.6% rise in April. Shipments of finished products fell for the second straight month and order backlogs were down in May, partly because of less demand for new commercial aircraft.

It was the first time durables orders had fallen since February, when they dipped 0.9%, and it was the biggest monthly decline since a 5.3% drop in December.

Economists said the domestic economy remains strong even though the drop in exports is hurting manufacturers.

Most economists expect growth to slow to a more moderate 2.5% rate in the second half of the year from the rapid 4.8% rate in the first quarter. The slowdown, which could drag on into next year, is likely to keep the Federal Reserve Board from raising interest rates in a bid to ward off inflation, at least for now, analysts said.

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Durable Goods

New orders, in billions of dollars, seasonally adjusted:

May: $184.3 billion

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Source: Commerce Department