Durable Goods Unexpectedly Fall

By JEFF BATER WASHINGTON -- Durable-goods orders fell sharply during August as lower aircraft demand caused the largest drop in seven months. Manufacturers' orders for durable goods dropped by 2.4% last month to a seasonally adjusted $164.44 billion, the Commerce Department said Thursday. Durables are designed to last at least three years. The 2.4% drop was the sharpest since 7.8% in January and marked an upset following a key measure that showed U.S. manufacturers' output last month rising for the first time since January 2008. The Institute for Supply Management reported on Sept. 1 that its manufacturing index came in at 52.9 in August, up from 48.9 in July and 44.8 in June. Numbers above 50 indicate growth. The report was taken as a sign the recession in manufacturing had ended. As for August durables, economists surveyed by Dow Jones Newswires had projected orders would climb 0.3%. A barometer for capital spending by U.S. businesses decreased in August. Orders for non-defense capital goods excluding aircraft fell by 0.4%, after decreasing 1.3% in July. Overall durables in July rose 4.8%, revised down from a previously estimated 5.1% increase. Durables year to date are down 24.9%, in unadjusted terms, from the same, eight-month period in 2008. Unfilled manufacturers' orders for durables, a sign of future demand, fell 0.4%. That's the 11th drop in a row. Manufacturers kept cutting inventory hard, Friday's data showed. Manufacturers' inventories of durable goods decreased in August by 1.3%. Orders in August for transportation-related goods plunged 9.3%. Motor vehicle orders rose 0.4%, a limp reading considering the success of the "cash for clunkers" program. Aircraft orders fell, down 42.2% for commercial and 10.6% for military planes. Excluding the transportation sector, orders for all other durables were unchanged in August. Demand ex-transportation had climbed 0.9% in July. Orders climbed for metals and machinery, while falling for electrical equipment and computers. August capital goods orders dropped 5.9%. Non-defense capital goods -- items meant to last 10 years or longer -- fell 7.1%. Defense-related capital goods orders went up by 1.1%. Orders for all durables except defense goods decreased by 2.4% in August, after going 4.2% higher in July. Durable-goods shipments of manufacturers fell 1.4% last month. Write to Jeff Bater at jeff.bater@dowjones.com