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Durable-goods orders fall for second month

Orders to U.S. factories for big-ticket manufactured goods fell in May, reflecting a second straight month of weakness in demand for commercial aircraft.
/ Source: The Associated Press

Orders to U.S. factories for big-ticket manufactured goods fell in May, reflecting a second straight month of weakness in demand for commercial aircraft.

The Commerce Department reported Friday that orders for durable goods dropped by 0.3 percent last month after an even bigger 4.7 percent plunge in April. The weakness in both months was led by big declines in orders for commercial aircraft, an extremely volatile category that had been enjoying large gains at the beginning of the year.

It was the first time that total orders have registered back-to-back declines in two years and provided further evidence that the U.S. economy is slowing under the impact of rising interest rates, soaring gasoline prices and a cooling housing market.

The 0.3 percent decline, which was a weaker-than-expected showing, pushed orders down to a seasonally adjusted $208.7 billion in May.

Orders for transportation equipment fell by 2.6 percent, reflecting a 17.9 percent plunge in demand for commercial aircraft.

The weakness in demand for commercial planes and parts followed an even bigger 29.7 percent drop in this category in May. Analysts had expected a drop in this category given that Boeing Co. took orders for only 33 aircraft in May compared to 149 bookings in April.

Offsetting somewhat the weakness in commercial aircraft was a big 26.4 percent rise in orders for military aircraft, an increase that followed a 34 percent decline in April.

Orders for autos and auto parts rose 2.5 percent in May following a 2 percent drop in April. Analysts are expecting continued weakness in this area as U.S. automakers face falling demand for sport utility vehicles and light trucks as consumers opt for more fuel efficient cars in the face of soaring gasoline prices.

For May, General Motors Corp. reported its sales were down 12 percent while Ford Motor Co. reported a 2 percent drop in sales and DaimlerChryslter AG’s Chrysler Group said sales had fallen 11 percent.

Excluding transportation, orders for durable goods, items expected to last at least three years, would have risen by 0.7 percent following a 1 percent drop excluding transportation in April.

Outside of transportation, orders for computers and electronic equipment fell by 1.1 percent while orders for primary metals such as steel rose by 3.5 percent.

The category of non-defense capital goods excluding aircraft posted a 1 percent gain in May after a 1.9 percent drop the previous month. This category is closely watched for signals it can give about business plans to expand and modernize their facilities.

The overall economy surged ahead at an annual rate of 5.3 percent in the first three months of this year. But economists are looking for a significant slowdown to around 3 percent in the current quarter and for the rest of this year. They believe that consumer spending, which accounts for two-thirds of total economic activity, will slow under the weight of a continued credit tightening campaign by the Federal Reserve to fight inflation.

Consumers are also being battered by rising gasoline prices and a cooling home market, which makes homeowners feel less wealthy and thus less eager to spend money.