Durable Goods Orders Decline

Orders for costly, long-lasting U.S. manufactured goods fell last month, a report Tuesday showed, pouring cold water on hopes that a long slump in business spending was beginning to ease.

U.S. durable goods orders slid 1.4% in November after a downwardly revised 1.7% gain a month earlier, the Commerce Department said. A 2.4% rise in orders had been reported for October.

Orders for most categories of durable goods fell in November and were much weaker than Wall Street expected; analysts were looking for a 0.7% rise.

“These numbers are weak across the board,” said Drew Matus, senior financial economist at Lehman Bros. “Usually you can find something upbeat in these figures, but this time there’s no good news at all.”

Capital goods orders excluding defense and aircraft, viewed as a proxy for business capital spending plans, fell 2.2% after a strong 5.9% October advance that had raised hopes that business capital spending was picking up.

A collapse in spending by businesses on plants and equipment, which had boomed in the 1990s, led the economy into recession and a turnaround in this area is seen as crucial for a sustained recovery.

Economists said the uncertainties surrounding the possible economic effect of a U.S. war with Iraq has made businesses reluctant to increase their spending.

“There is an underlying need for capital investment, but in this atmosphere of uncertainty companies don’t mind falling behind a little bit and just waiting till things clear up,” said Stephen Stanley, RBS Greenwich Capital Markets economist.

The report showed sharp drops in demand for civilian aircraft and autos that pulled orders for transportation equipment down by 1.6% in November. But even excluding that decline, overall durable goods orders were off 1.3%.

Orders for primary metals fell 4.6%, the largest drop since October 2000, and demand for fabricated metal products dropped 1.8%. Machinery orders fell 3.2% and orders for electrical equipment were down 0.6%.

The computers and electronic products sector was the only major durable goods category to post a gain last month, with a 0.3% rise that built on a 3.5% October increase.

Within that category, computer orders fell 3.7% and communications equipment orders rose 1.4%.

“The economy is not cascading lower, but I think any recovery is going to be very gradual,” said Dana Johnson, the head of research at Banc One Capital Markets.