WASHINGTON – Orders for long-lasting durable goods (search) fell much more sharply than expected in April as U.S. factories paused following a stellar March, whose numbers were revised even higher, government data showed on Wednesday.
The dollar dipped and U.S. government bonds strengthened after the Commerce Department (search) said orders for big-ticket items meant to last at least three years fell 2.9 percent, the largest decrease since a 6.0 percent fall in September 2002.
But March's gain was revised up again to 5.7 percent from 5.0 percent and February had been strong as well, with a 3.9 percent advance.
"The upward trend in capital spending is very much in place and we need to think of April as more of a payback for some huge numbers in the previous two months than anything that's a start of a new trend," said Joseph Lavorgna, chief fixed income economist at Deutsche Bank Securities.
Wall Street, wary of the volatile nature of this data series, had forecast a 0.2 percent decline as industry took a breather in an otherwise powerful upturn.
This has brightened the outlook for the country's battered manufacturers after they suffered in the 2001 recession and lagged in the economy's recovery.
Prices on the benchmark 10-year Treasury note were up 11/32, lowering the yield to 4.68 percent from Tuesday's 4.72 percent. The dollar nudged weaker against the euro to $1.2123 from $1.2110 shortly before the data.
The drop in orders was fairly broad-based, with non-defense capital goods excluding aircraft — a proxy for business spending — down 3.5 percent, while orders outside the defense sector were 2.4 percent lower.
Orders for machinery fell 4.9 percent while computer and electronics registered a 4.1 percent decline. Defense-related capital goods orders posted a 10.9 percent drop and demand for military aircraft was down 5.8 percent.
"We have seen sizable durable goods strength in the previous two months. Presumably this was more of a pullback from the excessive strength rather than an indication of weakness in the factory sector," said Bob Lynch, a currency strategist at BNP Paribas.