WASHINGTON – Factories saw orders for big-ticket goods fall for the second straight month in May, typifying the often uneven road of recovery for the nation's manufacturers.
The Commerce Department (search) reported Thursday that orders for "durables" (search) -- costly manufactured products expected to least at least three years -- dropped by 1.6 percent in May from the previous month. The weakness was broadbased with demand slackening for cars, machinery, computers and other goods.
The decline, which came on the heels of a 2.6 percent decrease in April, was disappointing to economists. They were forecasting a 1.5 percent rebound in orders for May.
Other recent reports, including two released by the Federal Reserve (search) last week, suggested that manufacturing activity was healthy in May. And, other barometers of the national economy's health continue to suggest it is on solid footing.
Against that backdrop, economists widely expect the Federal Reserve will raise short-term interest rates for the first time in four year when it meets next week. The Fed's main lever to influence economic activity is currently at a 46-year low of 1 percent. Most economists are forecasting a one-quarter percentage point rise.
Fed Chairman Alan Greenspan, in an appearance on Capitol Hill last week, said that policy-makers still hold the view the increases in inflation will be modest, which would mean that policy-makers could gradually raise interest rates. But if their forecasts turn out to be wrong, Greenspan said, the Fed is prepared to take more aggressive action.
In Thursday's manufacturing report, orders for transportation products, including cars and airplanes, fell by 4.1 percent in May, following a 4.6 percent drop in April.
Excluding orders for transportation products, which can swing widely from month to month, orders dipped by 0.7 percent last month, after a 1.7 percent decline in April.
Orders for machinery declined by 0.6 percent in May, after a 4 percent drop in April. Orders for computers went down by 3.6 percent, compared with a 7.4 percent increase. For communications equipment, orders plunged by 12.5 percent, after registering a 21.1 percent jump in April.
Shipments of big-ticket goods -- a measure of current demand -- also dropped in May, declining by 0.7 percent. That followed a 0.8 percent decline in April.