High Gas Prices Burn April Factory Orders

Orders to U.S. factories posted a weaker-than-expected gain in April as declines in demand for cars, planes and boats offset strength in business investment.

The Commerce Department reported Monday that factory orders increased by 0.3 percent in April, the weakest showing in three months. It was less than half of the 0.8 percent increase that analysts had been expecting.

Still, economists were encouraged that orders for non-defense capital goods excluding aircraft -- a category considered a good proxy for business investment -- was up a strong 2.1 percent in April following an even larger 4.6 percent rise in March.

The lower-than-expected overall reading reflected a 1.6 percent drop in orders for transportation equipment, an extremely volatile category that had soared by 13.6 percent the previous month.

Orders for motor vehicles and parts fell by 3.3 percent, reflecting continuing problems that domestic automakers are having with sagging demand in the face of soaring gasoline prices.

Orders for commercial aircraft plunged by 10.7 percent after having posted huge gains in the past two months.

Demand for ships and boats was down 23.4 percent, a reversal after a large 13.3 percent increase the previous month.

The 0.3 percent increase in orders followed a big 4.1 percent jump in March that had been powered by the strength in commercial airplane orders.

Even with the slower April showing, analysts believe that manufacturing is beginning to revive after a slowdown that reflected the weakness in the overall economy.

The gross domestic product, a measure of the economy's total output, rose at a barely discernible 0.6 percent in the first three months of the year, reflecting continuing troubles in the nation's housing industry.

However, many economists believe that figure will represent the low point for the slowdown. They are expecting gradually stronger numbers as the year progresses, although they caution that this outlook could prove too optimistic if the housing slump deepens further.

Orders for durable goods, items expected to last three or more years, rose by 0.8 percent, slightly better than the 0.6 percent increase initially reported.

One of the biggest declines for durable goods was a 31.5 percent plunge in construction machinery, reflecting continued troubles in home-building, where contractors are slashing building plans in the face of slumping demand.

Orders for non-durable goods edged down 0.2 percent in April as oil refineries continue to struggle with unexpected shutdowns.