* Durable goods orders tumble 4.2 percent in March
* Orders excluding transportation fall 1.1 percent
* Gauge of business spending plans dips 0.8 pct
* Broadly weak report points to loss of factory momentum
By Lucia Mutikani
WASHINGTON, April 25 (Reuters) – Demand for long-lasting
U.S. manufactured goods tumbled by the most in three years in
March and businesses cut back on spending plans, suggesting the
economy slowed as the first quarter drew to a close.
Durable goods orders dropped 4.2 percent, the largest
decline since January 2009 when the economy was nose-diving,
Commerce Department data showed on Wednesday. Economists had
expected a drop of just 1.7 percent.
February orders were revised to show only a 1.9 percent
increase instead of the previously reported 2.4 percent rise.
“This adds to the evidence that momentum in the economy sort
of fell flat in March,” said Ellen Zentner, a senior U.S.
economist at Nomura Securities in New York.
Data on durable goods, items ranging from toasters to
aircraft that are meant to last three years or more, is
notoriously volatile, and investors on Wall Street shrugged off
the report.
The data was the latest to show the factory sector losing a
step in March and reinforced the Federal Reserve’s view of
moderate growth over the coming quarters.
Fed policymakers, in a statement at the end of their two-day
meeting on Wednesday, again said they see modest growth, but
also said they expect economic growth “to pick up gradually.”
The U.S. central bank repeated its pledge to keep interest
rates on hold until at least late 2014 and offered few clues on
whether it would provide the economy further monetary stimulus
through a third round of bond purchases, known as quantitative
easing.
Stock prices rose on Wednesday, cheered by forecast-beating
results from Apple. Prices for U.S. Treasury debt fell,
while the dollar was little changed against a basket of
currencies.
MANUFACTURING LOSING SPARK
Wednesday’s report on durable goods followed data last week
that showed industrial production was flat in March for a second
straight month, while some gauges of regional factory activity
weakened in April.
Other recent signs of possible weakness in the U.S. economy
include a sharp slowdown in jobs growth in March and an ebbing
in consumer confidence.
But there was a silver lining in the durable goods report.
The data suggested that growth in business capital spending rose
in the first quarter and will support economic growth.
Although non-defense capital goods orders excluding
aircraft, a closely watched proxy for business spending plans,
fell 0.8 percent in March, the figure for February was revised
up to show a 2.8 percent gain, from the previously reported 1.7
percent increase.
In addition, shipments of non-defense, non-aircraft capital
goods orders, which are part of the calculation of gross
domestic product, rose 2.6 percent after increasing 1.4 percent
in February.
The U.S. Commerce Department’s first reading on gross
domestic product in the first quarter, to be released on Friday,
is expected to show that GDP grew at a 2.5 percent annual rate,
according to the median of a Reuters poll. GDP expanded at a 3
percent pace in the fourth quarter.
The drop in orders for durable goods and an expected rise in
inventories in the first quarter could set the economy up for a
soft patch heading into the middle of the year.
“Unexpected weakness in core orders in March suggests less
growth of equipment and software spending in the second quarter,
and more first-quarter inventory investment suggests a larger
decline in inventory investment in the second quarter,” said Ben
Herzon, an economist at Macroeconomic Advisers in St. Louis.
Orders for durable goods last month were dragged down by a
12.5 percent plunge in bookings for transportation equipment –
the most since November 2010 – as aircraft orders tumbled.
Boeing received only 53 orders for aircraft, according to the
plane maker’s website, down from 237 in February.
Orders for motor vehicles barely rose last month. Excluding
transportation, orders fell 1.1 percent after a 1.9 percent rise
in February.
