Manufacturing continues to struggle, and its weakness could prevent economic growth from picking up in the July-September quarter.
Orders for durable goods dropped 7.3 percent in July, the Commerce Department said Monday, the steepest drop in nearly a year. But excluding the volatile transportation category, orders fell only 0.6 percent. Both declines followed three straight months of increases.
Durable goods are items meant to last at least three years.
Economists tend to focus on orders for so-called core capital goods. Those orders fell 3.3 percent, but the drop followed four straight months of gains.
Core capital goods can show businesses’ confidence in the economy. They include items that point to expansion — including machinery, computers and heavy trucks — while excluding volatile orders for aircraft and military equipment.
The big drop suggested the third quarter was off to a weaker start than some had hoped. While economists cautioned that this was just one month of data, a few lowered their growth estimates for the July-September quarter after seeing the durable goods report. Economists at Barclays Capital now predict third-quarter growth at an annual rate of 1.9 percent, down from their previous forecast for 2.1 percent.
“At the very least, it is a reminder that the expected pickup in economic growth in the second half of the year will be gradual,” said Paul Ashworth, an economist at Capital Economics.
One bright spot was that unfilled orders for durable goods rose to their highest level since record-keeping began in 1992. Those are orders that were placed in previous months but had yet to be shipped. The increase suggested that output could remain steady in the coming months, despite the weak month of orders in July.
And orders for autos and auto parts rose 0.5 percent, the second monthly gain. Auto sales jumped 14 percent in July compared with a year earlier.
Manufacturing has slumped this year, hurt by weakness overseas that has dragged on American exports. But there have been signs that factory activity could pick up in the second half.
Article source: http://www.nytimes.com/2013/08/27/business/economy/sharp-fall-for-orders-of-durable-goods.html?partner=rss&emc=rss