Durable goods orders down 2.8%, biggest fall since 2002

USA TODAY

Durable goods orders down 2.8%, biggest fall since 2002
From wire reports

WASHINGTON — Orders to U.S. factories for big-ticket manufactured goods plunged 2.8% in March, the biggest setback in 2½ years and the third straight decline, the Commerce Department said Wednesday.

The March drop, showing much more weakness than had been expected, followed declines of 0.2% in February and 1.2% in January. It left new orders for durable goods, everything from bicycles to battleships, at a seasonally adjusted $194.03 billion in February.

The weakness in durable goods orders was just the latest evidence that the economy may be entering another "soft patch" as consumers and businesses, jolted by a sharp increase in energy prices, cut back on their purchases.

"It's clearly not a one-month aberration. Gasoline prices are climbing. Three-dollar gasoline is only a week or two away. The slowdown could stretch into the second quarter," said Christopher Low, chief economist at FTN Financial in New York.

The 2.8% drop in overall orders was the biggest decline since a 6% plunge in September 2002. It was a far worse performance than analysts had expected. They had been forecasting that orders would rise a modest 0.3% after an originally reported increase of 0.5% in February. The February increase was revised away to show a decline of 0.2%.

The three straight declines in new orders was the longest stretch of weakness since three straight declines from July through September 2001, a period that covered the last recession.

Last month's weakness was led by declines in demand for transportation. Orders for motor vehicles fell 2.4%, the third straight drop in this category. Demand for commercial aircraft plunged 22.7% and orders for military aircraft fell an even larger 35%.

Excluding the volatile transportation category, orders for durable goods — pricey manufactured items meant to last three years or more — sank 1.0%, the Commerce Department said.

The total level of new orders was at its lowest since June 2004. Durable goods orders excluding defense fell 3%, the biggest drop since September 2002.

Civilian aircraft orders slumped 22.7% last month after a big rise in February, and defense aircraft orders plummeted 35%.

The report suggested businesses were scaling back spending plans last month as orders for non-defense capital goods, excluding aircraft, dropped 4.7%. That decline follows a 2.5% slide in February.

Demand for machinery dropped 7.6%, orders for fabricated metal products fell 0.1%.

Among the few bright spots in the report, communications equipment orders rose 5.1% and orders for primary metals climbed 1.0%.