Durable Goods Orders Drop 3.8 Percent In April

Businesses cut back on their orders for heavy machinery, computers, autos and airplanes in April, reducing demand for long-lasting manufactured goods by the largest amount in six months.

Orders for durable goods fell 3.8 percent and a key category that serves as a proxy for business investment was down 2.8 percent, the Commerce Department reported Wednesday.

The weakness was widespread across a number of industries and likely was influenced by supply chain disruptions stemming from the Japanese earthquake in March. Demand for motor vehicles and parts, an industry heavily dependent on Japanese component parts, saw a decline in orders of 4.4 percent in April, the biggest drop since last August.

The April decline left orders at $189.9 billion in April, 18.3 percent above the recession low hit in March 2009.

The big drop in April came following a 4.4 percent increase in March, a gain that was revised up from a previously reported 2.9 percent increase.

In addition to the weakness in autos, demand for commercial aircraft fell 30 percent in April. Analysts had expected a big drop in this highly volatile category because new orders at Boeing slowed sharply in April.

Orders for nondefense capital goods excluding aircraft, a category viewed as a good indication of business investment plans, fell 2.6 percent in April after a big 5.4 percent rise in March. Despite the April drop, economists are forecasting strong gains in business capital spending for the rest of this year as companies boost purchases of equipment to take advantage of a one-year tax break that Congress passed in December.

Excluding all transportation categories, orders would have been down 1.5 percent in April after rising 2.5 percent in March.

Other industries seeing a drop in demand in April included primary metals such as steel, down 1.5 percent, and computers, down 4.4 percent. Demand for machinery fell 3.4 percent in April.

Analysts expect the April declines to be temporary. Strong demand domestically and overseas has kept U.S. factories humming, making manufacturing one of the strongest sectors of the economy since the recession ended in June 2009. The overseas demand has been supported by a weaker dollar, which makes U.S. products cheaper in foreign markets.

U.S. factories have added 167,000 jobs over the past six months, the best stretch of hiring gains in manufacturing since 1997.

Source: http://www.npr.org/2011/05/25/136641059/durable-goods-orders-drop-3-8-percent-in-april?ft=1&f=1017

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