U.S. Durable Goods Orders Plummet

Feb. 27, 2007
New car and aircraft demand dramatically decreased.

Orders for manufactured durable goods sank 7.8% in January, mainly as demand for new cars and aircraft fell heavily, the Commerce Department said Feb. 27. The sharp drop was more than double what most Wall Street analysts had expected and suggested fresh weakness in the U.S. factory sector. The slump in orders was the sharpest since October of last year.

"The 7.8% decline in durable goods order in January was widespread across the heavy goods industries," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI. "Primary metals, machinery, high tech, and transportation industries all saw new orders decline in January. Furthermore, the severity of the decline in new orders more than offset the gain achieve in December. Certainly, the swing from abnormally mild to severe winter weather played a part in this see-saw pattern of industrial activity.

"There is no escaping the observation, though, that growth in the manufacturing sector ground to a halt in September 2006 and continues to struggle as consumers rethink big-ticket spending and businesses turn risk adverse in their capital spending," he added.

The fall in overall orders was largely tied to weakness in the transportation sector which saw orders plummet 18% following a rise of 3.1% in December.

Orders for new automobiles, including cars, pickups and sports utility vehicles (SUVs), dropped 5.1% after chalking up a gain of 3.1% previously.

Demand for new electronic goods rose 7.9%, rebounding from a 0.9% drop previously

Commercial aircraft orders plunged 60.3% from a 31.1% gain in December. And orders for new military aircraft fell 54.6% after gaining 16.5% previously. Orders for military equipment, however, rebounded 10.7% from a drop of 28.7%, as the military's need for fresh kit and supplies surged.

Excluding the plunge in transportation, orders fell 3.1% in January following a spike of 2.6% in December. Orders fell 7.8% excluding the defense sector, marking the segment's biggest drop ever, after notching up a 4% gain in December.

Source: Agence France-Press, IW Staff

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