Orders for U.S. durable goods fall 5.7 percent in March

Orders for U.S. durable goods fall 5.7 percent in March
WASHINGTON (AP) - Orders for long-lasting U.S. factory goods fell in March by the most in seven months. The drop reflected a steep decline in commercial aircraft demand and little growth in orders that signal future business investment.

The Commerce Department said Wednesday that orders for durable goods declined 5.7 percent in March. That followed a 4.3 percent gain in February, which was revised lower.

Durable goods are items expected to last at least three years.

So-called core capital goods, which include industrial machinery and computers, ticked up only 0.2 percent. Economists pay close attention to these orders because they strip out more volatile defense and aircraft orders and are a good measure of companies' investment plans.

The March increase in both orders and shipments of core capital goods suggest businesses spent more on equipment and software in the January-March quarter. That likely contributed to economic growth in the first quarter.

Still, most of the gain was from a huge increase in January. Orders fell sharply in February and rose only slightly last month. That indicates businesses may be spending less on equipment in the April-June quarter, economists said.

Weaker economies overseas and the impact of across-the-board government spending cuts have made businesses more cautious. That's reduced demand for manufactured goods. Spending on defense equipment also fell sharply last month.

Orders for durable goods tend to fluctuate sharply from month to month and economists cautioned against reading too much into one monthly decline.

"This doesn't look like we're entering some kind of downward spiral," said Jonathan Basile, an economist at Credit Suisse. "This seems like a downshift from stronger growth."

The overall decline in durable goods was exacerbated by a 48.2 percent fall in commercial aircraft orders. Boeing Co. reported that it received orders for only 39 aircraft, compared to 179 in the previous month.

Orders for defense aircraft and other military goods also dropped. Joseph LaVorgna, an economist at Deutsche Bank, noted that orders for defense equipment fell to their lowest level in over seven years.

Still, even excluding aircraft and transportations demand, orders dropped 1.4 percent, the second straight decline.

Demand fell in most types of goods. Orders dropped for metals such as steel and aluminum, metal parts, electrical equipment and appliances, and defense aircraft. Orders increased for computers and communications equipment.

Many economies overseas are also sluggish, reducing exports. China's manufacturers grew at a slower pace in March, according to a survey released Monday, as export orders and employment declined. Europe's economy has been in recession.

The U.S. economy likely grew at a healthy 3.1 percent annual rate in the first quarter, up from only a 0.4 percent rate in the fourth quarter. The Commerce Department will release its first estimate for January-March growth on Friday.

But many economists expect growth has begun to slow to a rate of 2 percent or less in the current April-June quarter.

Higher Social Security taxes have reduced Americans' take-home pay this year. That's starting to limit their spending power. The government spending cuts that began in March will also likely weigh on growth.

Other reports suggest that manufacturing is starting to weaken after showing signs of strength over the winter. Strong auto production hasn't been enough to offset broader slowdowns in other industries.

Factory output slipped in March, according to a Federal Reserve report last week. And a survey of purchasing managers earlier this month found that manufacturing expanded at a slower pace in March compared with February. The Institute for Supply Management's survey showed that new orders and production declined sharply.