Sunday, June 25, 2006

Durable goods orders post first back-to-back monthly declines in 2 years

Durable goods orders post first back-to-back monthly declines in 2 years

WASHINGTON (AP) — Orders to U.S. factories for big-ticket manufactured goods fell in May, reflecting a second straight month of weakness in demand for commercial aircraft.

The Commerce Department reported Friday that orders for durable goods dropped 0.3% last month after an even bigger 4.7% plunge in April. The weakness in both months was led by big declines in orders for commercial aircraft, an extremely volatile category that had been enjoying large gains at the beginning of the year.

It was the first time that total orders have registered back-to-back declines in two years and provided further evidence that the U.S. economy is slowing under the impact of rising interest rates, soaring gasoline prices and a cooling housing market.

The 0.3% decline, which was a weaker-than-expected showing, pushed orders down to a seasonally adjusted $208.7 billion in May.

Excluding transportation, orders for durable goods, items expected to last at least three years, rose 0.7% following a 1% drop excluding transportation in April.

Orders for transportation equipment fell 2.6%, reflecting a 17.9% plunge in demand for commercial aircraft.

Offsetting somewhat the weakness in commercial aircraft was a big 26.4% rise in orders for military aircraft, an increase that followed a 34% decline in April.

Orders for autos and auto parts rose 2.5% in May following a 2% drop in April. Analysts are expecting continued weakness in this area as U.S. automakers face falling demand for sport-utility vehicles and light trucks as consumers opt for more fuel efficient cars in the face of soaring gasoline prices.

Outside of transportation, orders for computers and electronic equipment fell 1.1% while orders for primary metals such as steel rose by 3.5%.

The category of non-defense capital goods excluding aircraft posted a 1% gain in May after a 1.9% drop the previous month. This category is closely watched for signals it can give about business plans to expand and modernize their facilities.

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