U.S. July Durables Orders Fall 4.9%; Ex-Transport. Down 3.2%
U.S. July Durables Orders Fall 4.9%; Ex-Transport. Down 3.2%
Aug. 24 (Bloomberg) -- U.S. orders for durable goods declined more than forecast in July after a three-month surge, reflecting less demand for aircraft, computers and communications equipment.
Bookings for goods made to last at least several years fell 4.9 percent, the biggest decline since January 2004, after a 1.9 percent rise in June, the Commerce Department said today in Washington. Economists expected a 1.5 percent decrease in July, based on the median of 62 forecasts in a Bloomberg News survey.
A measure of orders for business equipment fell by the most since October 2004, suggesting rising energy costs may have prompted some companies to adjust their spending plans. With consumers also pinched by record gasoline costs, the economy may receive less of a boost from spending in the months ahead, economists said.
``Higher energy costs have taken a toll on business plans to purchase capital equipment,'' said Chris Rupkey, senior financial economist at Bank of Tokyo-Mitsubishi Ltd. in New York, before the report. ``There is enough uncertainty in the air that the prudent course is for companies to scale back on some of their business equipment purchases.''
Excluding transportation, which is volatile month to month, orders fell 3.2 percent, the biggest drop since April 2004, after a 3.6 percent rise in June.
Economists expected durable goods orders to fall from a previously reported 2.8 percent rise in June, according to the median of 62 forecasts in a Bloomberg News survey. Estimates ranged from a decline of 4.5 percent to an increase of 1 percent. Excluding transportation equipment, forecasts ranged from a decline of 1.5 percent to a gain of 1.7 percent. The government last week revised its factory orders data back through 1992.
Business Equipment
Businesses went on a spending spree late last year before a 2003 tax provision that granted incentives for buying capital equipment lapsed in December. Companies paused in the first quarter to work off inventories before stepping up orders, economists said.
Orders for non-defense capital goods excluding aircraft, a proxy for future business investment, declined 3.7 percent last month after rising 4.8 percent in June.
Shipments of such equipment, which the government uses to construct quarterly gross domestic product figures, fell 0.5 percent after falling 0.2 percent.
Spending on new equipment and software rose at an 11 percent annual rate from March through June after an 8.3 percent pace in the previous quarter, according to the latest government figures on economic growth.
Aircraft
Orders for transportation equipment dropped 8.6 percent in July after declining 1.6 percent in June and rising 23.5 percent in May. Boeing Co., the world's No. 2 aircraft maker, said it received orders for 88 planes in July, compared with 162 in June and 200 the previous month. Automobile orders rose 1.5 percent and bookings for civilian aircraft slumped 20.2 percent.
Machinery orders decreased 6.2 percent last month, the biggest decline since April of last year, after increasing 10.3 percent in June. Orders for computers and electronic products dropped 5.9 percent after jumping 7.2 percent, the Commerce Department said. Communications equipment orders fell 7.1 percent.
Orders for military equipment slumped 16.6 percent last month after increasing 27.8 percent. Excluding defense, durable goods orders fell 4.5 percent.
Inventories of durable goods rose 0.6 percent after falling 0.4 percent. Unfilled orders, a gauge of future production, increased 1 percent after rising 2.8 percent.
August Rebound
In the second quarter, companies reduced inventories at a $6.4 billion annual pace after boosting them at a $58.2 billion rate in the first quarter, according to the latest government figures on gross domestic product.
Recent manufacturing reports suggest that factory orders picked up this month. A measure of bookings at Philadelphia-area factories accelerated in August to the highest level since April, the Fed said on Aug. 18. Manufacturing in New York state expanded for a third month in August as orders surged to a high for the year, the Fed reported on Aug. 15.
Also, economists prefer to look at the trend in durable goods orders rather than month-to-month changes to better gauge factory demand and the July decline followed three straight increases.
``Most people were looking for a downward correction after recent data, but recent manufacturing sector data suggests the trend is picking up,'' said David Sloan, chief U.S. markets economist for 4Cast.com in New York.
Computers
Hewlett-Packard Co., the world's largest printer maker and No. 2 seller of personal computers, said last week that sales for the quarter ended July 31 rose 9.9 percent compared with the same period last year.
Higher shipments of laptop computers offset a decline in desktop sales, said Mark Hurd, Palo Alto, California-based Hewlett-Packard's chief executive.
``This business has been on a steady incline and a steady improvement,'' Hurd said in a conference call with investors on Aug. 16.
Mike Splinter, chief executive officer of Applied Materials Inc., the world's largest maker of semiconductor-making equipment, said on Aug. 16 that he expected orders to pick up.
``Utilization of factories is going up as demand starts to increase and that gives people more confidence in investing,'' Splinter said in an interview from Mountain View, California. ``We're confident that we are going to see orders increase for the next couple of quarters.''
To contact the report on this story: Bob Willis in Washington bwillis@bloomberg.net
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