Durable Goods Orders Fall for Third Straight Month
New orders for long-lasting U.S.-made manufactured goods dropped for a third straight month during October and companies seemed wary about making new investments, a Commerce Department report on Wednesday showed.
Orders for durable goods fell 0.4 percent last month after declining 1.4 percent in September and 5.3 percent in August. Excluding transportation items, orders were down more sharply by 0.7 percent.
Wall Street economists surveyed by Reuters had forecast that overall orders would be flat, instead of down, and that orders excluding transportation would rise 0.3 percent.
Nondefense capital goods orders excluding aircraft, a category that gauges companies' willingness to make new investments, weakened by 2.3 percent in October -- the biggest monthly decline since a 2.4 percent drop last February.
Economist Pierre Ellis of Decision Economics Inc. in New York said the size of the fall in non-defense capital goods excluding aircraft was "too much to indicate that the situation is favorable for investment, but not enough to indicate a problem derived from the financial crisis."
"So the picture remains muddled," Ellis added.
Bond prices pared losses after the soft durable goods data was published, apparently hopeful that it increased chances for further interest-rate cuts. The dollar lost ground against other key currencies on the new signs of U.S. weakening.
Among key categories, transportation orders rose slightly by 0.2 percent but defense orders were down 10.6 percent. Orders for computers plunged 15.2 percent after rising 7.6 percent in September.
The soft October orders data add to signs the economy is slowing in the final quarter of this year. Many analysts say odds are rising of a significant slowdown in 2008 while the economy struggles to get past the drag from a weakening housing sector and problems with subprime mortgages that are creating a pinch on credit.
David Wyss, chief economist for Standard & Poor's in New York, said the durables report was "bad news for manufacturing" and pointed to broader-based economic difficulties.
"It suggests that this economy is weakening rapidly," Wyss said, especially because of the decline in nondefense capital goods excluding aircraft. "It suggests to me that the Fed needs to give the economy another kick."