Durable-goods orders drop 1.4%

Guide for business investment spending falls a 6th month

A worker inspects a 2015 aluminum-alloy Ford F-150 pickup at the company’s Kansas City Assembly Plant in Claycomo, Mo., earlier this month. Orders for durable goods dropped in February, the Commerce Department said.
A worker inspects a 2015 aluminum-alloy Ford F-150 pickup at the company’s Kansas City Assembly Plant in Claycomo, Mo., earlier this month. Orders for durable goods dropped in February, the Commerce Department said.

WASHINGTON -- Orders to U.S. factories for long-lasting manufactured goods fell in February for the third time in the past four months, while a key investment category fell for a sixth month.

Orders for durable goods dropped 1.4 percent in February after a 2 percent increase in January and declines of 3.7 percent in December and 2.2 percent in November, the Commerce Department reported Wednesday.

A key category that serves as a proxy for business investment spending retreated 1.4 percent in February, the sixth consecutive monthly decline.

"Businesses have been extremely cautious,"said Stephen Stanley, chief economist at Amherst Pierpont Securities in Stamford, Conn. "The economy hasn't been especially strong. In particular, people have had their doubts about the sustainability of growth."

The weakness in February was widespread, with weaker demand for commercial aircraft, autos and machinery. The result adds to a slew of disappointing data from recent economic indicators. Economists, however, expect domestic demand to strengthen in the months ahead and hope that will be enough to offset weakness caused by a stronger dollar, which dampens export sales of U.S. companies.

Transportation orders were down 3.5 percent. Excluding transportation, durable-goods orders dropped 0.4 percent. Demand for machinery and computers fell, while orders for communications equipment and appliances rose.

Paul Ashworth, chief U.S. economist at Capital Economics, blamed some of the weakness to the decline in energy prices, which has led to cutbacks in drilling plans by oil and gas companies. But he noted one sign of encouragement -- business surveys of investment spending plans have improved significantly in recent months.

"We would expect to see a rebound in equipment investment in the second quarter," Ashworth said.

Many economists are looking for manufacturing orders to start strengthening after a stretch of weakness in the second half of last year. They believe the end of harsh winter weather and the settlement of a labor dispute at West Coast ports, both of which caused supply disruptions, should help.

"The severe weather likely played at least some role in this, but the trend clearly has turned down since last summer," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Analysts expect strong consumer spending, powered by a year of healthy job gains, will improve domestic demand and help to offset global weakness and the strong dollar.

Growth in the overall economy slowed significantly in the October-December quarter, with a widening trade deficit trimming growth by more than a percentage point.

The government on Friday will release its third and final estimate of economic growth in the fourth quarter. Analysts expect growth will be revised slightly to a rate of 2.4 percent, up from the previous estimate of 2.2 percent. But that would still leave the economy expanding far below the 5 percent rate in the third quarter. And economists believe growth has remained sluggish in the current January-March period at around 2 percent.

Joy Global, the world's largest maker of underground mining machinery, is feeling the pain of reduced equipment spending. Lower copper and coal prices have prompted mining companies around the world to rein in capital expenditures, hurting Joy's sales of loaders and shovels.

"We had expected a slower first quarter with many of our customers taking extended production shutdowns," Chief Executive Officer Ted Dohney said during a March 5 conference call. "Over the last several months, the global economic landscape has become more challenging."

Information for this article was contributed by Martin Crutsinger of The Associated Press, by Victoria Stilwell of Bloomberg News and by Jim Puzzanghera of the Los Angeles Times.

Business on 03/26/2015

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