Orders to U.S. factories for big-ticket goods fell by 1.2 percent in February, the biggest decline in three months, a fresh sign of the struggles facing the nation's battered manufacturing sector.

The decline erased part of the 1.9 percent gain in orders for costly manufactured products registered in January, the Commerce Department reported Wednesday.

Private economists predicted orders for durable goods -- products expected to last at least three years -- would fall in February as companies put off buying new equipment as the war with Iraq became imminent.

The drop in February's orders, however, wasn't as big as the 1.5 percent decline economists were forecasting.

The manufacturing sector, hardest hit by the 2001 recession, has been the biggest drag on the economy's ability to get back to full throttle.

In February, the weakness in orders to factories was broadbased, with losses reported for computers, cars and metals.

Tuesday's report is consistent with other recent data which showed that manufacturing activity was lackluster in February.

Federal Reserve policy-makers last week decided to keep short-term interest rates at 1.25 percent, a 41-year low, saying they would keep a close eye on economic developments surrounding the war. Economists believe the Fed won't hesitate to cut rates before its next scheduled meeting on May 6 if the economy were to flash danger signals.

President Bush, meanwhile, has offered a package made up mostly of tax cuts to revive the listless economy.

That plan ran into resistance in the Senate on Tuesday. A series of Senate votes left only $350 billion, although the president wanted $726 billion over the next decade to inject new growth into the economy by accelerating scheduled income tax cuts and reducing dividend taxes. The House had previously approved providing $726 billion for the president's economic growth plan.

In the durable-goods report, orders for automobiles fell 1.5 percent in February, down from a 9.9 percent advance in January.

Excluding orders for transportation equipment, durable-goods orders declined 2.1 percent in February, the largest decline in eight months.

Orders for computers dropped 12.3 percent in February, compared with a 1.2 percent rise in January. For primary metals, the category including steel, orders fell 2.3 percent, reversing part of January's 2.8 percent increase.

Shipments, a good barometer of current demand, decreased by 1.6 percent in February, compared with a 2.7 percent gain in January.

The biggest factor holding back the economy's recovery is the reluctance of business to make big commitments in hiring and in capital spending, due in part to uneasiness about war and generally to an uncertain business environment.

Against that backdrop, the nation's unemployment rate rose to 5.8 percent in February as the economy lost a whopping 308,000 jobs.

Separately, the percentage of Americans who were 30 or more days late paying their credit card bills in the final quarter of 2002 rose to a seasonally adjusted 4.07 percent, a record high for any quarter, and up from 4 percent in the third quarter, the American Bankers Association reported Wednesday.

"The rise in delinquencies is not surprising given the cumulative weight of layoffs and the poor prospect for re-employment in the face of anemic job growth," said James Chessen, the association's chief economist.

"While the numbers continue to show that roughly 96 percent of people pay their bills on time, the increase in late payments nonetheless reflects financial hardships facing those affected by the nation's jobless recovery," Chessen said.