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Orders for big-ticket durable goods increase by 3.3 percent in August
WASHINGTON -- New orders for big-ticket manufactured products rose in August at the fastest pace in three months, providing a reassuring sign that American factories are not headed for another slump.
The Commerce Department said that orders for durable goods, items expected to last at least three years, jumped 3.3 percent after falling by 5.3 percent in July. Analysts had been expecting a rebound but the rise was far better than the 0.8 percent advance they had forecast.
The big drop in July had raised concerns that the manufacturing sector, the hardest hit sector in the 2001 recession, could be in danger of falling into another slump.
But analysts took heart not only from the size of the rebound but also the fact that it covered a number of key categories.
"The really good news is that the strength is broad-based, with hefty gains in metals, computers, electricals, machinery and aircraft," said Ian Shepherdson, chief U.S. economist for High Frequency Economics, a consulting firm in Valhalla, N.Y.
On Wall Street, the Dow Jones industrial average edged up 16.88 points Wednesday to close at 10,473.09 as some of the gains from the better-than-expected orders report melted away in the face of another rise in oil prices.
In other economic news, the American Bankers Association reported that the percentage of credit card payments that were past due shot up to a record high of 4.81 percent in the April-June quarter. Economists blamed the rise on soaring gasoline prices putting a strain on consumers' budgets.
"Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations," said ABA chief economist Jim Chessen.
Consumer confidence suffered its biggest drop in 15 years in September, a decline blamed on the rising anxiety of Americans over how they were going to pay their heating bills and fill their gasoline tanks. The Conference Board said its consumer confidence index fell by 18.9 points to 86.6 from an August reading of 105.5.
The worry is that energy prices, pushed higher by the shutdowns caused by Hurricanes Katrina and Rita, will cause consumers to cut back on their spending on other items, delivering a more sizable blow to the U.S. economy from the hurricanes than currently expected.
Economists say the impact of Katrina could trim growth by a full percentage point in the second half of this year, but they expect the economy to recoup those losses in 2006, boosted by the billions of dollars expected to be spent on rebuilding.
The August report on durable goods orders showed that the overall gain included a 1.4 percent increase in demand for motor vehicles and airplanes. But even excluding this increase, demand for manufactured goods was strong, rising by 4.2 percent, the biggest increase excluding transportation in 17 months.
Orders for motor vehicles and parts rose by 0.8 percent after a 1 percent gain in July, an increase that was driven by strong sales fueled by attractive incentive offers.
Orders for commercial aircraft shot up 9.4 percent in August, while orders for military aircraft were up 15 percent.
Outside of transportation, the strength last month was led by a 5.5 percent rise in orders for computers and other electronic products.
Demand for primary metals such as steel rose by 9.2 percent, while orders for machinery were up 3.5 percent.
Total orders for manufactured goods rose by a seasonally adjusted $6.8 billion to $210.9 billion.
Shipments of durable goods, considered a good signal of current demand, rose 1.7 percent to $208.5 billion.