By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) -- The recovery in the manufacturing sector stumbled in August, as a big decline in orders for new airplanes pushed total durable goods orders down 2.4%, the largest decline since January, the Commerce Department reported Friday.
The 42% drop in orders for civilian aircraft accounted for most of the 2.4% decline in August. Aircraft orders had soared 98% in July.
Weaker demand wasn't confined to the aircraft sector, however. Excluding the 9.3% drop in transportation orders, orders were flat in August, the weakest showing since April.
Orders for computers and electrical equipment fell, offsetting gains in machinery and metals. Orders for motor vehicles increased 0.4%.
Orders for core capital equipment goods fell 0.4% in August after a 1.3% decline in July, a signal that business investment remains tepid despite the turnaround in the auto industry.
The report on durable orders and shipments was much weaker than expected. Economists surveyed by MarketWatch were anticipating a 0.7% gain.
July's order book was revised down to a 4.8% gain from 5.1% previously reported.
Orders for durable goods are quite volatile from month to month, but the trend in new orders is considered a valuable leading indicator of the economy as a whole. Durable goods are expensive items designed to last three years or longer.
Shipments of durable goods fell 1.4% after rising 2.2% in July. Shipments of core capital equipment goods - a direct input into gross domestic product calculations - fell 1.9% in August after rising 0.3% in July.
Inventories of durable goods fell 1.3%, the eighth straight decline. Manufacturers are reducing their inventories at a rapid pace, in an effort to bring supply back in line with demand.
Economists expect the pace of inventory reduction to slow in the third quarter, a big reason they believe the economy will show growth in the quarter for the first time in more than a year.
Details
Orders are down about 25% in the first eight months of 2009 compared with 2008.
Transportation orders fell 9.3% in August after a 17.7% increase in July. Shipments fell 2% in August.
Orders for electronics (excluding semiconductors) fell 0.7% in August after rising 1.7% in July. Shipments fell 2.6%.
Orders for machinery rose 0.7% in August after falling 7.9% in July. Shipments fell 1.4%.
Orders for electrical equipment fell 0.5% in August after rising 4.2% in July. Shipments fell 3.4%.
Orders for unfinished metals increased 1.9% in August after a 3.2% gain in July, Shipments rose 1.6%.
Orders for fabricated metals increased 0.8% in August after rising 3.5% in July. Shipments were flat.
Orders for capital equipment excluding aircraft and defense goods fell 0.4% after falling 1.3%. Shipments dropped 1.9%.
Orders for defense capital goods rose 1.1% after rising 15.9%. Shipments rose 2.9%. Excluding all defense goods, durable goods orders dropped 2.4%.
