Durable Goods Orders Decline

Orders placed with U.S. factories for durable goods fell in April by the most in seven months on fewer bookings for automobiles and business equipment, a government report showed Wednesday.

The 2.4% decrease to $168.9 billion in orders for items made to last at least three years followed an increase of 1.4% in March, the Commerce Department said. Excluding vehicles and other transportation equipment, bookings fell 1.2%, erasing March’s 1.1% rise.

Manufacturers are waiting for stronger consumer and business spending before they expand production, economists said. General Motors Corp. and Ford Motor Co. said they planned to trim North American output this quarter because demand has slowed.

“Sustained improvement in manufacturing will require both consumer and capital spending to accelerate,” said Steven Wood, chief economist at Insight Economics in Walnut Creek, Calif. “This is unlikely to emerge over the next couple of months.”

The statistics do little to support Federal Reserve Chairman Alan Greenspan’s recent comment that business spending may be starting to pick up, as suggested by increasing backlogs of business equipment. Backlogs of capital equipment ordered but not delivered fell 0.1% in April after a 1.9% increase.

An increasing order backlog for such goods is “modestly encouraging,” Greenspan told Congress last week. Companies still appear hesitant to spend and hire, “and we need to remain mindful of the possibility that lingering business caution could be an impediment to improved economic performance.”

The median forecast of 59 economists surveyed before the durable goods report was a decline of 1%. The April decline was the largest since a 4.6% drop in September.

Capital goods shipments, which the government uses to compile quarterly gross domestic product figures, rose 1.7% in April after a 1.8% increase, Wednesday’s report said.

“This may point to a pickup in equipment and software spending in the current quarter,” said Peter Kretzmer, an economist at Banc of America Securities in New York. In the first quarter, that spending fell at a 4.4% annual rate.

Durable goods inventories fell 0.1% in April and have declined in 26 of the last 27 months.

Factories are operating at less than three-fourths of capacity as businesses spend less on semiconductors and heavy machinery.

Industrial production dropped in April for a second straight month because of sluggish demand, Fed figures show.