US durable orders fall, but business investment up

Associated Press Modified: September 27, 2012 at 8:30 am •  Published: September 27, 2012

WASHINGTON (AP) — Demand for long-lasting manufactured goods plunged in August because of a huge drop in volatile commercial aircraft orders. But in a hopeful sign, orders that reflect business investment plans rose.

The Commerce Department said Thursday that total durable goods orders fell 13.2 percent in August. That's the biggest drop since January 2009 when the country was in recession. Aircraft orders fell by nearly 102 percent, pulling down the headline figure.

Economists tend to pay more attention to core capital goods, which signal investment plans. Those orders rose 1.1 percent. That's the first increase since May, although it follows steep declines in the previous two months.

Durable goods are items that are expected to last for at least three years.

Paul Ashworth, chief U.S. economist at Capital Economics, said the August decline is not a reason to "panic." He said many economists were expecting a sharp drop in aircraft orders after 260 planes were ordered in July.

Excluding transportation, durable goods orders fell 1.6 percent in August. The figure was dragged down by a 40.1 percent drop in defense orders.

"The massive ... slump in US durable goods orders in August was largely due to a drop back in the notoriously volatile commercial aircraft component," Ashworth said. Ashworth also noted that motor vehicle orders fell 10.9 percent in August, but that reversed a 12.1 percent spike in July orders, "when fewer than normal auto plants shut down for summer retooling."

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