Orders for big-ticket goods drop for second consecutive month

Wednesday, September 27th 2006, 8:40 am
By: News On 6

WASHINGTON (AP) _ Orders to U.S. factories for big-ticket manufactured goods fell for a second consecutive month in August, marking the first back-to-back declines in more than two years.

The Commerce Department reported Wednesday that demand for durable goods dropped 0.5 percent last month to $209.7 billion. The $1 billion drop from July, when orders had fallen an even bigger 2.7 percent, reflected a plunge in demand for computers and other electronic products.

The August performance was worse than had been expected and was certain to raise concerns about whether weakness in manufacturing could contribute to a bigger slowdown in overall economic growth.

Orders for durable goods, items expected to last at least three years, have been one of the strongest sectors of the economy in recent years as factories rebounded from the 2001 recession.

For August, demand for computers and electronic products dropped by 4.7 percent or $1.5 billion.

Demand for cars, airplanes and other transportation products was up 3.7 percent, as strength in autos offset further weakness in commercial aircraft.

Demand for motor vehicles rose by 4.4 percent last month while orders for commercial aircraft fell by 21.9 percent. Orders for military aircraft rose by 9.8 percent.

Excluding the volatile transportation sector, orders were down 2 percent, the biggest setback in this category in 13 months.

Orders for non-defense capital goods, considered a good indication of company plans to expand and modernize, fell by 3.5 percent last month after a 0.6 percent decline in July.

That could be seen as a worrisome development given that economists are looking for business investment to help cushion the economic slowdown that is occurring because of a cooling housing market and smaller advances in consumer spending.

The overall economy roared ahead at a 5.6 percent pace in the first three months of the year but then slowed to a 2.9 percent rate of growth in the spring.

Analysts believe growth will slow even further to around 2.5 percent growth in the last half of this year but the concern is that some unexpected development could translate into an even weaker economy.