Durable-Goods Orders Drop 13.2% - WSJ.com
By JEFFREY SPARSHOTT And ERIC MORATH
WASHINGTON—Orders for long-lasting goods plunged in August as commercial-aircraft purchases tumbled and demand for other items tailed off, the latest sign of a weakening manufacturing sector.
Meanwhile, U.S. economic output in the second quarter was weaker than previously thought, as slower consumer spending and the drought in the Midwest held back growth. The nation's gross domestic product—the broadest measure of goods and services produced in the U.S.—grew at an annual rate of 1.3% between April and June, the Commerce Department said Thursday. The revised figure is down from the previously reported 1.7% gain. Economists surveyed by Dow Jones Newswires expected a 1.7% growth rate for the quarter.
Orders for durable goods, products designed to last at least three years, fell 13.2% last month to a seasonally adjusted $198.49 billion, the Commerce Department also said.
That was the biggest decrease since January 2009 and the lowest dollar figure for new orders since February 2011. Economists surveyed by Dow Jones Newswires expected a 5.6% drop in August new orders.
Durable-goods orders for July were $228.62 billion, a 3.3% gain from the prior month.
Declining transportation orders led the August numbers lower.
Civilian-aircraft orders, a volatile component of the durable-goods report, collapsed. That was expected. Wrightson ICAP noted that Boeing Co. BA +1.24% orders fell from 260 in July to one last month. "This is a temporary lull, as those orders have picked up again so far in September," Wrightson ICAP said ahead of the durable-goods report.
While other sectors didn't fall as much, they still declined.
Motor-vehicle and parts orders dropped 10.9%.
Outside of transportation, August orders slid 1.6%.
Orders for metals, machinery and computers all declined. Electrical-equipment orders rose 3.8%.
Thursday's report showed that one key barometer of business investment grew in August. Orders for nondefense capital goods excluding aircraft increased by 1.1%, suggesting a small degree of optimism among companies about the economic recovery.
The industrial sector has flashed mixed signals recently, though overall signs point to a slowdown.
A Federal Reserve Bank of Chicago report out this week said U.S. industrial production dropped sharply in August. A separate Philadelphia Fed report last week said factory activity in the Mid-Atlantic region continued to contract this month, though at a slower pace than in August.
The Commerce data out Thursday showed defense capital orders dropped 40.1% in August. Excluding defense, durable orders dropped 12.4%
Unfilled orders, a sign of future demand, decreased 1.7%. Shipments of durable goods slid 3.0%, while inventories inched ahead by 0.6%.
The revised GDP figure, which takes into account more complete data than last month's report, showed more mild growth because of downward revisions in inventory investment, consumer spending and exports.
The drought in the Midwest caused farm inventories to fall, and second-quarter crop output was revised down by $12 billion, contributing to a downward restatement of farm inventories, Commerce said.
Consumer spending was revised down to a 1.5% gain in the quarter from a previously reported 1.7% improvement, as purchases of financial services and insurance were revised lower.
And exports were revised down as new data showed travel by foreigners wasn't as strong as prior readings.
The latest estimate of economic growth reinforces that the economy has expanded at a sluggish pace with the presidential election just weeks away.
President Barack Obama points to an economy that has expanded for 12 consecutive quarters, rebounding from a deep financial crisis. However, Republican Mitt Romney says the administration's policies have produced growth that is too weak to push the unemployment rate below 8%.
In response to the tepid recovery, the Federal Reserve announced plans this month to buy mortgage-backed securities on an open-ended basis until the labor market improves. The central bank was able to take the unprecedented action in part because inflation pressure remains mild.
Thursday's report showed the price index for personal consumption expenditures—the Fed's preferred gauge for inflation—rose 0.7% from the previous quarter. When removing volatile food and energy costs, the index rose 1.7% from a year earlier, according to the revised figures.
Meanwhile, corporate profits were better than previously thought.
From a year earlier, corporate profits from current production were up 6.7%, compared with a previously reported 6.1% gain. The figure measures business income generated from production during the quarter and excludes items, such as capital gains, that revalue existing assets.
By another measure, corporate profits—after tax and unadjusted for inventories and capital consumption—grew 14.5% from a year earlier, though they were down 0.4% from the prior quarter, according to revised figures. The after-tax numbers more closely reflect what companies would report in quarterly accounting
In another report, the number of U.S. workers filing applications for jobless benefits fell to its lowest level since July, an indication that the labor market may be slowly improving.
Initial jobless claims, a measure of layoffs, were down by 26,000 to a seasonally adjusted 359,000 in the week ended Sept. 22, the Labor Department said.
Claims for the week ended Sept. 15 were revised up to 385,000 from an initially reported 382,000.
Economists surveyed by Dow Jones Newswires expected 375,000 new applications for jobless benefits last week.
The four-week moving average of claims, which smooths out sometimes-volatile weekly data, decreased by 4,500 to 374,000.
A Labor economist said that the latest data included "very minor activity" related to Hurricane Isaac, though not enough to impact national figures.
Earlier this month, about 9,000 additional claims were a result of the storm that hit several Gulf Coast states and Puerto Rico in late August.
Thursday's numbers may indicate that the labor market is improving, but the figures crept higher through much of August and serve as a reminder not to read too much into any single week's report.
The number of continuing unemployment-benefit claims—those drawn by workers for more than a week—fell by 4,000 to 3,271,000 in the week ended Sept. 15. Continuing claims are reported with a one-week lag.
The number of workers requesting unemployment insurance was equivalent to 2.6% of employed workers paying into the system in the week ended Sept. 15. The rate has remained constant since mid-March.
Write to Jeffrey Sparshott at
jeffrey.sparshott@dowjones.com and Eric Morath at
eric.morath@dowjones.com