Orders for long-lasting US factory goods fell sharply last month as demand for commercial aircraft plummeted and businesses spent less on computers and electrical equipment.
The Commerce Department said today that orders for durable goods plunged 7.3% in July, the steepest drop in nearly a year. Excluding the volatile transportation category, orders fell just 0.6%.
Both declines followed three monthly increases in a row.
Durable goods are items meant to last at least three years and the drop suggests manufacturing continues to struggle after starting the year weak.
Economists focus on orders for so-called core capital goods, which exclude volatile aircraft and defence orders. Spending in that category fell 3.3% after four months of gains in a row.
One bright spot from today's figures was the fact that unfilled orders, which were placed in previous months but are yet to be shipped, rose to their highest level since records began in 1992. That suggests output could remain steady in the coming months, despite the weak month of orders in July.
Manufacturing has slumped this year, hurt by weakness overseas that has dragged on US exports. But there have been signs that factory activity could pick up in the second half of the year. Europe finally emerged from recession in the spring. And in June, US exports rose to an all-time high.
A survey by the Institute for Supply Management, a trade group, said factory activity expanded in July at the fastest pace in two years. Companies hired more workers and new orders surged, both signs that output should rise in the coming months.
The US economy expanded at just a 1.7% annual rate in the three months from April to June. Most economists expect that figure will revised up to a 2.2% annual rate, mostly because of the jump in June exports.
The government issues its second estimate for second-quarter growth on Thursday. Most analysts predict growth may pick up to about a 2.5% annual rate in the second half of the year. They note that steady job growth should fuel more consumer spending and the impact of higher taxes and government spending cuts are likely to fade.
