Durable Goods Orders Plummet in March

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AP
Durable Goods Orders Plummet in March

By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON - Orders to U.S. factories for big-ticket manufactured goods plunged 2.8 percent in March, the biggest setback in 2 1/2 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 percent in February and 1.2 percent 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.

"The soft patch is turning soggy," said David Wyss, chief economist at Standard & Poor's in New York. "I think it is likely that we will come out of the soft patch, but we can't be sure."

Wyss said a lot will depend on whether oil prices continue to decline from their recent surge.

Wall Street initially fell on the disappointing orders report, with the Dow Jones industrial average off by more than 60 points. But by midday, the Dow Jones industrial average had recouped those losses and was back in positive territory.

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

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 percent, the third straight drop in this category. Demand for commercial aircraft plunged by 22.7 percent and orders for military aircraft fell by an even larger 35 percent.

Excluding transportation, orders last month would have been down by a slightly smaller 1 percent following a small 0.2 percent drop in orders excluding transportation in February.

Demand for computers and other electronic products was one of the few areas showing strength last month, posting a 2.2 percent increase. Orders for primary metals such as steel rose by 1 percent.