Durable Goods Orders Down Larger-Than-Expected 2.4 Percent in April

Orders for U.S. durable goods (search) fell sharply in April on slumping demand for cars and military aircraft, the government said Wednesday in a report that showed the U.S. factory sector (search) still mired in a downturn.

The Commerce Department (search) said orders for durable goods -- items meant to last three or more years -- slid 2.4 percent in April after a revised gain of 1.4 percent in March.

Analysts polled by Reuters had been anticipating a smaller 1.0 percent drop-off in orders after March's surprise gain. Commerce said April's drop in new orders was the largest since September 2002, when orders fell by 4.6 percent.

Orders for transportation equipment fell by a hefty 5.4 percent, accounting for much of the overall decline, weakness was seen across many manufacturing sectors. Orders excluding transportation goods fell 1.2 percent, while orders excluding defense-related goods were down by 1.5 percent.

"It's a little bit worse than expected, but not enough to be alarming given the volatility of the index," said Christopher Low, chief economist with FTN Financial in New York.

The report underscored the fragile state of the U.S. factory sector, which continues to struggle with excess capacity in the wake of the 1990s boom in business investment (search).

The closely-watched index of manufacturing activity compiled by the Institute for Supply Management (search), issued earlier this month, dipped to 45.4 in April from 46.2 in March as new orders hit an 18-month low. Factory payrolls were also down again in April, with the sector shedding 95,000 jobs, the Labor Department said earlier this month.

Within the Commerce report, orders for motor vehicles and parts dipped 3.0 percent while orders for military aircraft and parts fell 26.4 percent, Commerce said.

Orders for non-defense, non-aircraft capital goods, a measure some economists see as a more reliable indicator of underlying manufacturing trends, were also off by 3.0 percent.

In a related development, the Commerce Department said it will begin publishing data on shipments, but not orders, of semiconductors, beginning with the July durables report to be issued in August. Data on semiconductors has been missing from the report for more than a year. Confirming news reported by Reuters on Tuesday, Commerce announced said it had reached an agreement with representatives of the semiconductor industry to provide the shipments data.