Durable Goods Orders Post Surprise Plunge

New orders for long-lasting U.S. manufactured goods plunged unexpectedly in November, falling at the steepest rate in more than a year across a broad spectrum of categories, a government report said on Wednesday.

The Commerce Department (search) said orders fell 3.1 percent to a seasonally adjusted $180.07 billion -- defying Wall Street economists' expectations for a 0.8 percent rise.

It was the biggest monthly orders decline since a 6 percent tumble in September 2002 and followed a revised 4 percent increase in October orders.

Bond prices bounced higher on the durables report, which interrupted a trend of positive data recently that had been indicating the recovery from the 2001 recession was gaining strength. However, economists noted that the report is known for its volatility and is frequently revised.

Every single category of durable goods -- those intended to last three years or more -- suffered weaker demand in November, with orders for everything from computers and aircraft to new cars and defense goods falling.

The biggest single decline in November came in orders for computers and electronic products, which fell 10.8 percent to $30.09 billion after rising 2.6 percent in October.

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New applications for state unemployment insurance, a gauge of hiring conditions, fell 1,000 to 353,000 in the week ended Dec. 20 from a revised 354,000 in the prior week, Labor said.

Analysts said even a slight decline in jobless pay applications was encouraging.

"The message is, the downward trend of jobless claims remains in place, which implies that layoffs have decelerated and companies are probably hiring," said economist Asha Bangalore of Northern Trust Co. in Chicago.

"This bodes positively for the December payroll numbers," Bangalore said, referring to the government's closely watched monthly report on employment scheduled for release on Jan. 9.

In the durable goods report, a category that Commerce calls non-defense capital goods excluding aircraft orders, taken as a proxy for business spending plans, fell 5.9 percent to a seasonally adjusted $55.59 billion. It was the biggest decline in this segment in more than 1-1/2 years since a 7.8 percent fall in March 2002.

A drop in this category may dampen budding hopes that businesses were taking up the spending baton from stalwart American consumers -- something analysts and Federal Reserve (search) officials say is vital to keeping a solid expansion on track.

Alex Beuzelin, a currency analyst with Ruesch International in Washington, D.C., said the surprise orders drop showed ample slack still in the economy and underlined that the third quarter's 8.2 percent annual rate of growth in gross domestic product was slowing sharply.

"This provides some evidence that the robust pace of growth we saw in the third quarter is going to cool down in the fourth," Beuzelin said.