Companies trimmed their orders for long-lasting manufactured goods in February with a key category that signals business investment falling for a second month.
The Commerce Department reported Thursday that businesses reduced orders for durable goods 0.9 percent last month, the fourth decline in the past five months. Weakness was seen in a number of categories from heavy machinery and computers to primary metals such as steel.
Even with the February decline, durable goods orders were 24.6 percent above the recession low hit in March 2009. Manufacturing has been a source of strength in this recovery. Economists expect that to continue with factories getting a boost from rising consumer demand and a new tax cut aimed at spurring business investment.
There is some concern about what the disruptions in Japan might do to factory output in the United States. U.S. auto and electronics companies are seen as the most vulnerable to potential shortages of critical component parts.
But many economists believe that as long as Japanese factories are able to avoid lengthy shutdowns, any impact on U.S. firms should be short-lived.
Orders in a category that signals business investment plans dropped by 1.3 percent last month after having fallen 6 percent in January, which had been the biggest decline in two years.
However, economists believe this weakness is temporary. They are looking for a new tax break which accelerates for write-offs for spending on capital equipment to spur demand in this area in 2011.
One of the few sources of strength in February was a 26.7 percent rise in demand for commercial aircraft, a very volatile category that has soared in the past two months. Orders for autos rose 1.9 percent in February but demand for defense aircraft fell 18.4 percent.
Excluding transportation, orders dropped 0.6 percent in February following a 3 percent fall outside of transportation in January.
The weakness included a 2.1 percent decline in demand for primary metals, a 4.2 percent drop in orders for machinery and a 0.4 percent fall in demand for computers and related products. Total electronics products rose 0.6 percent and demand for appliances was up 2.6 percent.
Manufacturing activity has been expanding since the recession officially ended in June 2009. The Federal Reserve reported last week that factories produced more cars, appliances, computers and furniture in February, lifting manufacturing output for a sixth straight month. Industrial production has risen nearly 12 percent since hitting its recession low in June 2009.
The expectation is that U.S. factories will continue to benefit from rising consumer demand in the U.S. and strong exports.
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