Durable-goods orders fall larger-than-expected 7.3% in July

By Jim Puzzanghera

Aug. 26, 2013 6:40 AM PT

WASHINGTON -- Orders for airplanes, computers and other durable goods, a key indicator of future economic growth, dropped more than expected last month in a bad sign for the strength of the vital manufacturing sector.

The Commerce Department said Monday that orders were down 7.3% in July from the previous month, the first drop since March and the biggest falloff since August 2012.

Orders had been up a revised 3.9% in June. Analysts had projected a 4% drop for last month.

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Many economists have been projecting that the nation’s economic recovery would pick up steam in the second half of the year. Monday’s data raise doubts about that.

“The growth bulls will have to begin rethinking their second-half acceleration story after the latest durable goods report,” said Steven Ricchiuto, chief economist at Mizuho Securities.

July’s drop was fueled by a sharp decline in orders for civilian aircraft and parts, down 52.3%. Orders for computers and related products also posted a major drop, down 19.9% in July from the previous month.

Transportation equipment orders can be particularly volatile month to month, driven in large part by business at Boeing Co. The company received just 90 new orders for jetliners in July, down from 287 the previous month.

Excluding transportation, durable goods orders fell 0.6% in July after a 0.1% increase the previous month.

Orders for non-defense capital goods, excluding aircraft, which is an important sign of business investment, were down 3.3% in July, the first drop since a 4.8% decline in February. The figure was up 1.3% in June.

Federal Reserve policymakers are closely watching incoming economic data as they consider reducing their stimulus efforts.

Many analysts have said the Fed could begin reducing its $85 billion in monthly bond purchases next month. But the disappointing durable goods report could add fuel to Fed officials who want to hold off on tapering those purchases by the central bank.

US Durable Goods New Orders data by YCharts