Economy and Manufacturing & Technology

Durable goods orders tick up, but business spending slides

August 25, 2010

Orders to U.S. factories for big-ticket manufactured goods increased slightly in July, but businesses spent less as the economic recovery lost momentum.

Demand for durable goods rose 0.3 percent last month, the Commerce Department said Wednesday. The overall increase was driven by a 75.9-percent increase in orders for commercial airplanes.

Without the volatile transportation sector, orders dropped 3.8 percent—the steepest decline since January. Businesses spent less on equipment and machines. Orders for capital goods fell 8 percent.

Machinery and computers were especially hard-hit. Orders for machinery dropped 15 percent, the biggest decline on record for that category.

The report was grim compared to June's results. Overall orders in June declined by a revised 1 percent. But excluding transportation, orders rose 0.2 percent. Spending by businesses increased 3.6 percent that month—a rare bright spot.

Factory orders are a key measure of the economic recovery. Manufacturers have helped to lead the rebound. They filled orders for businesses that were building up stocks after whittling them down during the recession.

But many companies are done restocking, cooling demand for factory goods.

With unemployment still near double digits, consumers have not taken up the slack.

Durable goods are products expected to last three years or more. The full survey of factory orders will be released next week.

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