updated 6/27/2007 4:08:29 PM ET 2007-06-27T20:08:29

Orders to U.S. factories for big-ticket manufactured goods plunged in May by the largest amount in four months as demand for aircraft, heavy machinery and metals all declined.

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The Commerce Department reported Wednesday that new durable goods orders dropped by 2.8 percent last month, a far bigger drop than the 1 percent decline economists had been forecasting.

The weakness was led by a huge 22.7 percent plunge in commercial aircraft orders, which can be extremely volatile from month to month. But orders were also down for a wide array of other goods, from primary metals such as steel to machinery and electronic appliances.

Orders for nondefense capital goods excluding aircraft, considered a good proxy for business investment, fell by 3 percent, the biggest drop since a 4.4 percent plunge in January.

Economists discounted some of the weakness, noting that the government revised previous months upward to show more strength in orders.

“Manufacturing is doing OK, but it is not going to be a major source of growth in the near future,” said Mark Zandi, chief economist at Moody’s Economy.com. He said factories were being held back by continued troubles in the domestic auto industry and with the problems in housing, which has depressed demand for building products and construction machinery.

“Strong global demand should generate enough strength in export markets to allow for modest economic and manufacturing growth,” predicted Cliff Waldman, an economist for the Manufacturers Alliance/MAPI, an industry trade group.

The economy slowed to a barely discernible annual growth rate of just 0.6 percent in the first three months of this year. But economists believe growth has rebounded in the April-to-June quarter to a more robust 3.5 percent rate despite the severe slump in housing that has lasted longer than expected.

The Federal Reserve was expected to leave interest rates unchanged when it concludes a two-day meeting on Thursday, repeating its past views that inflation remains the dominant threat to the economy.

The 22.7 percent drop in orders for commercial aircraft reflected the fact that Boeing Co. took orders for 92 planes in May, down from a bumper crop of 136 orders in April.

Orders for motor vehicles actually rose by 2.3 percent last month, following a 2.8 percent drop in April.

Orders in the transportation category fell by 6.8 percent, the biggest drop since January.

Even without the weakness in transportation, orders would have been down last month, dropping by 1 percent when that category is excluded.

One of the few areas of strength was in computers and electronic products, which were up 1.8 percent.

With the decline, orders totaled $213 billion on a seasonally adjusted basis in May.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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