Durable Goods Orders Fall Surprising 2.3% in April
New orders for costly durable goods weakened in April on soft new-car and aircraft demand, a Commerce Department report Wednesday showed, but a recovery in the nation’s manufacturing sector remained intact.
The total value of orders for new durable goods fell 2.3% to a seasonally adjusted $194.38 billion--contrary to Wall Street economists’ forecasts for a slim 0.3% gain--after a 2.7% jump in March.
Durables are manufactured items, ranging from computers to household appliances and ballistic missiles, expected to last three years or more.
The manufacturing sector suffered over the last two years because of slumping exports to Asia, but has shown recent signs of modest revival.
Analysts said the surprising downturn in April durables orders was so concentrated in transportation goods that it obscured the steady improvement in manufacturing activity.
Excluding a 12.4% plunge in demand for transportation products to a value of $41.63 billion, durables orders increased 0.9%, after a 2% rise in March. Transportation accounts for more than one-fifth of the value of total monthly durables orders.
“The underlying trend is improving, reinforcing the view that the strength in domestic manufacturing is showing through now that export orders have stopped declining,” said economist David Orr of First Union Corp. in Charlotte, N.C.
There were order increases for several categories of durable goods, including a 3.5% gain in demand for industrial machinery, which includes computers, to $39.69 billion after a matching rise in March. Primary metals orders were up 1.3% to $14.70 billion, reversing March’s 0.6% decline.
The report showed that the value of closely watched new orders for non-defense capital goods--a measure of businesses’ investment plans--declined 1.5% during April to $52.51 billion after a 0.1% March gain. Excluding aircraft and parts, however, these orders increased 0.3% on top of a 3.9% jump in March.
The president of the National Assn. of Manufacturers, Jerry Jasinowski, said the pickup in industrial machinery orders showed that a capital spending boom that has lasted through the 1990s was continuing, although overall economic growth likely was losing a step.
“The economy is coasting to a more sustainable pace, following two quarters of unusually strong growth,” he said, probably easing to an annual rate around 2.5% to 3% in the second quarter from 4.5% in the first quarter.
Jasinowski added the hope that an easing in the rate of expansion would relax Federal Reserve concerns about potential inflation and keep the U.S. central bank from boosting interest rates at its next policy-setting meeting June 29-30.
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Durable Goods
New orders, in billions of dollars, seasonally adjusted:
April: $194.4 billion
Source: Commerce Department
