Orders For Big-Ticket Durable Goods Plunge
Wednesday, September 26th 2007, 7:55 am
By: News On 6
WASHINGTON (AP) _ Demand for big-ticket manufactured goods plunged in August by the largest amount in seven months, with widespread weakness signaling a slowdown in the nation's industrial sector.
The Commerce Department reported Wednesday that orders for durable goods, everything from commercial jetliners to home appliances, fell by 4.9 percent in August, the biggest decline since a 6.1 percent fall in January.
It was far larger than the 3.5 percent drop that economists had been expecting and resulted from across-the-board decreases in a number of categories. The concern is that the steep downturn in housing and turbulence in financial markets could start to affect the economy more broadly, raising the risks of a full-blown recession.
The Federal Reserve last week cut a key interest rate by a bigger-than-expected half-point, hoping to avert a slump. Analysts believe further rate cuts are likely at the Fed's final two meetings of the year in October and December.
In a favorable development for the economy, the United Auto Workers and General Motors Corp., agreed early Wednesday to a tentative contract that ends a two-day national strike. A lengthy strike against the nation's largest automaker could have had ripple effects that would have dragged business growth down even further.
Many analysts believe the overall economy, after racing ahead at a 4 percent annual rate in the spring, slowed in the summer to growth in the gross domestic product of around 2.5 percent. They also believe this growth rate will slow to around 2 percent in the final three months of the year. Some put the chance of a recession as high as 50-50.
The 4.9 percent fall in orders for durable goods, items expected to last three or more years, followed a big gain of 6.1 percent in July. That increase reflected in part a jump in orders for autos as dealers tried to stockpile inventory in advance of a threatened strike.
For August, orders for transportation equipment fell 11.2 percent, the biggest setback since January. The weakness was led by a 41 percent drop in demand for commercial aircraft. Boeing Co. reported fewer orders in August after a big surge in July.
Orders for motor vehicles and parts dropped 6.2 percent after having surged by 10.5 percent in July. Offsetting the weakness somewhat was a 43.2 percent surge in demand for military aircraft.
Excluding the volatile transportation category, orders would have still been down by 1.8 percent after a 3.4 percent rise in orders outside of transportation in July.
Orders fell in a large number of categories including primary metals such as steel, machinery and communications equipment. Demand was up for computers and electrical equipment.