Originally created 05/29/03

Durable goods fall 2.4 percent in April

WASHINGTON -- Orders to U.S. factories for big-ticket goods fell in April by the largest amount in seven months, fresh evidence that the battered manufacturing sector is the weakest link in the economy's ability to get back to full speed.

The Commerce Department reported Wednesday that orders for durable goods - manufactured products such as cars and appliances expected to last at least three years - dropped by 2.4 percent in April from the month before, when they rose by 1.4 percent.

April's decline in orders was deeper than the 1 percent decrease economists were expecting and marked the largest drop since September.

Federal Reserve Chairman Alan Greenspan, in an appearance on Capitol Hill last week, called recent production figures for big industry weak. Businesses remain cautious and are wary of making big spending and hiring commitments, he said. That is a major factor restraining the economy's recovery.

Also Wednesday, the department announced that data on shipments of semiconductors will again be included in the monthly durable-goods report under an agreement with the semiconductor industry.

The shipments information will start showing up again in the durable goods report for July, which will be released on August 26. However, data on orders to factories for semiconductors will continue to be absent from the reports.

Orders, shipments and other information on semiconductors had been dropped from the reports when some major companies stopped supplying it to the government. The information had been provided on a voluntary basis.

In Wednesday's report, orders for transportation equipment fell 5.4 percent in April, following a 2.1 percent rise.

Excluding transportation orders, which can swing widely from month to month, durable-goods orders went down by 1.2 percent in April, the second decrease in three months.

Orders for automobiles in April fell 3 percent, on top of a 1.6 percent decline in March.

For electrical equipment and appliances, orders declined by 3.6 percent in April, more than wiping out March's 3.5 percent gain. Orders for communications equipment fell 5.1 percent, after dipping 0.1 percent in March.

For machinery, orders declined 3.7 percent, reversing much of March's 3.9 percent advance.

In a bright spot, orders for computers jumped by 15.3 percent in April after slipping by 0.3 percent in March.

Some economists believe the Federal Reserve may cut short-term interest rates, now at a 41 year low, at its next meeting on June 24-25, in a bid to energize the economy and ward off the possibility that deflation - a widespread and prolonged decline in prices - could erupt in the United States.

Greenspan and his colleagues say the chance of deflation cropping up is remote, but it is so serious and dangerous that policy-makers must be on guard.

Other economists, however, believe the Fed will hold interest rates at their currently low rates at the June meeting.


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