U.S. durable goods plunge worst since recession

WASHINGTON — New orders for long-lasting U.S. manufactured goods in August fell by the most in 3-1/2 years, pointing to a sharp slowdown in factory activity even as a gauge of planned business spending rebounded.

The Commerce Department said on Thursday durable goods orders dived 13.2%, the largest drop since January 2009, when the economy was in the throes of a recession. Orders for July were revised down to show a 3.3% increase instead of the previously reported 4.1% gain.

Economists polled by Reuters had expected orders for durable goods — items from toasters to aircraft that are meant to last at least three years — to fall 5%.

Last month, the drop in orders reflected weak aircraft and automobiles demand. Boeing received only one aircraft order in August, down from 260 in July, according to information posted on the plane maker’s website.

Transportation equipment tumbled 34.9% after racing ahead 13.1% in July. Excluding transportation, orders fell 1.6% after dropping 1.3% the prior month. Economists had expected this category to rise 0.3% after a previously reported 0.6% fall.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rose 1.1%, halting two straight months of hefty declines. That was above economists’ expectations for 0.5% gain.

Jonathon Rivait/National Post

But shipments of these goods, which are used to calculate equipment and software spending in the gross domestic product report, fell 0.9% after declining 1.1% in July. The wea kness su ggested third-quarter economic growth would probably not improve much from the April-June’s 1.3% annual pace.

Manufacturing, which has been the main driver of the recovery from the 2007-09 recession, has been hit by turbulence from sluggish domestic and global demand.

Fears that the U.S. Congress could fail to avert a “fiscal cliff” — the $500 billion or so in expiring tax cuts and government spending reductions set to take hold in 2013 — have also left businesses with little incentive to boost production.

Financial Post