Durable Goods Orders Down on Aircraft Orders

WASHINGTON – Orders for long-lasting U.S. durable goods (search) slipped unexpectedly in August as demand for civilian aircraft plunged, but the data beat expectations once transportation was stripped out, government data showed on Friday.

The Commerce Department (search) said orders for big-ticket items meant to last at least three years fell 0.5 percent after gaining an upwardly revised 1.8 percent in July. July's gain was initially reported as a 1.7 percent rise

Wall Street had forecast orders would stay flat overall and rise 1.0 percent excluding the highly volatile transportation component.

Commerce said orders excluding transportation rose a solid 2.3 percent after July's 0.1 percent gain, which was revised from unchanged.

Orders for computers and electronic products rose 4.1 percent after slumping 4.3 percent in July, while orders for civilian aircraft fell 42.8 percent after soaring 103.6 percent the previous month.

Taken as a whole, the data may bolster confidence that the United States will see stronger economic growth in the third quarter after a period of slower growth in the prior three months, although the report showed businesses remain cautious.

Non-defense capital goods excluding aircraft — which economists use as a gauge of business spending — fell 0.5 percent.

When aircraft orders are included, capital goods orders outside the defense sector fell 7.4 percent after gaining 9.3 percent the previous month. It was the biggest drop since September 2002's 12.3 percent decline.

The U.S. manufacturing sector has regained steam after being hit hard by the 2001 recession at the cost of several million factory jobs — making the economy a key issue in the country's upcoming November presidential election.

But the employment picture is showing signs of stabilizing and output, driven by a boom in worker productivity, has increased.

Confidence in the expansion this year has given the Federal Reserve (search) scope to end a long stretch of very low interest rates.

The U.S. central bank raised rates three times this year, with the latest increase coming on Tuesday when it upped the fed funds target rate by a quarter percentage point to 1.75 percent.