Durable Goods Orders Drop 4.5 Percent In August

By: AP
By: AP
Chart shows new orders of durable goods for the past 13 months;

Chart shows new orders of durable goods for the past 13 months;

WASHINGTON - Orders for big-ticket manufactured goods plunged in August by the largest amount in seven months as demand for both airplanes and autos fell sharply.

The Commerce Department reported Thursday that orders for durable goods fell by 4.5 percent last month, far worse than the 1.6 percent decline that economists expected. It was the biggest setback since a 4.7 percent fall in January and came after modest increases in the past three months.

The widespread weakness was led by a 38.1 percent fall in orders for commercial aircraft, the biggest drop in this category in a year. Demand for autos fell by 8.1 percent — the biggest drop in 19 months — as automakers struggle with the weak economy and falling demand for once-popular trucks and sport utility vehicles.

"This is a very weak report," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "Industry is in trouble."

While manufacturers have struggled with weak domestic demand, especially in sectors linked to housing and autos, some of that drop-off has been offset by strong sales to foreign countries. There are concerns that exports could start to falter given spreading weakness in such big overseas markets as Europe and Japan, however.

For August, the 4.5 percent drop in orders for durable goods, items expected to last at least three years, left demand at a total $208.5 billion, 1.6 percent below the year-ago level.

Demand for heavy machinery fell by 6.2 percent while orders for primary metals such as steel fell by 9.3 percent, the biggest drop in the metals category in 15 years.

Orders for nondefense capital goods excluding aircraft, considered a proxy for business investment plans, fell by 2 percent, a possible sign that businesses, worried by the weak economy, are cutting back on their plans to expand and modernize.

Excluding transportation, orders were down 3 percent, much worse than the 0.5 percent drop that had been expected.


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