ORDERS for big-ticket manufactured goods drop for second straight month

Friday, August 24th 2001, 12:00 am
By: News On 6

WASHINGTON (AP) _ Orders to American factories for big-ticket manufactured goods fell for a second consecutive month, dropping 0.6 percent in July, another sign that U.S. industry remains stuck in a pronounced slowdown.

The Commerce Department said Friday that the July decline followed an even bigger 2.6 percent fall in June. Orders for durable goods, items expected to last three or more years, have fallen in three of the last four months as manufacturers continue to struggle with a mountain of unsold products.

The Federal Reserve cut interest rates for a seventh time on Tuesday, hoping that lowering borrowing costs will stimulate increased demand and keep the country out of a recession.

Most economists believe the Fed formula, combined with nearly $40 billion in tax rebate checks, will work to boost demand and allow American manufacturing companies to halt production cutbacks that so far have resulted in more than 800,000 lost jobs over the past year.

While the Bush administration is hoping that rebound will begin in the current quarter, Friday's report showed that manufacturers were beginning the July-September quarter facing the same falling demand they had endured in the second quarter.

The report said that July's weaknesses was led by a 4.4 percent drop in new orders for computers and related high-tech products. Weakness at technology companies have been blamed for much of the economy's overall troubles since last summer. The big drop last month occurred in demand for semiconductors, which fell by 12.4 percent.

However, within the broad computer category, companies making communication products reported a hefty 18.3 percent increase in orders, only the third rise this year, and the biggest gain for this sector in 13 months.

New orders for transportation equipment also managed a 1.3 percent increase in July, reflecting a 3.8 percent increase in demand for autos and parts. Despite the economic slowdown and increasing layoffs, consumer spending has remained strong in such areas as autos and housing. This has been the key factor keeping the country out of a recession.

Excluding the strength in transportation, new orders would have fallen by an even bigger 1.4 percent in July, the fourth decrease in the last five months.

Excluding products destined for the military, new orders would have fallen by 1 percent.

The overall decline of 0.6 percent pushed new orders for durable goods down to $182.02 billion in July.