Durable goods orders weaker than expected

updated 10:29 a.m. ET March 24, 2005

WASHINGTON - New orders for U.S.-made durable goods edged up an unexpectedly weak 0.3 percent in February, signaling that the U.S. economy might be a touch softer than economists had thought.

In a somewhat disappointing signal on the factory sector and business spending plans, the Commerce Department said on Thursday orders for durable goods — pricey manufactured items meant to last three years or more — slipped 0.2 percent when strong transportation orders were stripped out.

Wall Street economists had expected durable goods orders to climb 1 percent and 0.5 percent excluding transportation.

Prices for U.S. government bonds rose slightly and the dollar slipped against the euro and yen after the data were released.

Economists, however, took note of a slight upward revision to January’s durable goods orders and said the data still suggested a solid economic expansion.

“At this point, it still appears that businesses will increase investment to improve productivity,” said Lynn Reaser, chief economist at Banc of America Capital Management in St. Louis.

Civilian aircraft orders shot up 32.1 percent last month, partly reversing a big January drop, and defense aircraft orders gained 11.3 percent. Economists had looked for a strong non-defense figure after Ryanair announced an order for planes from Boeing Co. valued at more than $4 billion.

The durable goods report suggested businesses curtailed spending plans last month as orders for non-defense capital goods, excluding aircraft, fell 2.1 percent after a healthy 4.4 percent January gain.

Demand for machinery dropped 1.1 percent, orders for fabricated metal products declined 1 percent and communications equipment orders slid 1.2 percent.

Orders for primary metals, however, rose 0.6 percent and orders for computers gained 2.1 percent, reversing a January drop. The report also showed a 1.6 percent decline in shipments of durable goods in February.

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