Durable-goods orders decrease

Jeannine Aversa

Friday, Sept. 24, 2004 | 9:24 a.m.

WASHINGTON -- Orders to U.S. factories for big-ticket goods dropped in August, largely weighed down by a sharp decline in demand for commercial airplanes.

The Commerce Department reported today that orders for durable goods -- costly manufactured products expected to last at least three years -- declined by 0.5 percent, following a 1.8 percent advance in July.

The manufacturing picture, however, looked better when volatile transportation equipment, such as airplanes, was excluded: Orders rose by a solid 2.3 percent in August. That compared with a flat reading for July and marked the biggest increase since March.

"The manufacturing recovery is progressing," said Daniel Meckstroth, chief economist at the Manufacturers Alliance/MAPI, a research group.

Separately, sales of previously owned homes declined by 2.7 percent in August from July to a seasonally adjusted annual rate of 6.54 million units, the National Association of Realtors reported. Even with the drop, which followed a 2.9 percent decrease in July, the pace of sales was still considered healthy, economists said.

"Since April, we've experienced three out of the four strongest months on record for existing-home sales and August was the sixth highest," said David Lereah, the association's chief economist.

On the manufacturing front, economists were forecasting a 0.3 percent decline in overall durable-goods orders for August based on the expectation that demand for commercial airplanes would decline after shooting through the roof in July. Orders for commercial aircraft plunged by 42.8 percent in August, compared with a 103.6 percent surge in July. Bookings for military airplanes and parts also declined in August.

That drop in airplane bookings masked gains elsewhere. Orders for cars, computers, communications equipment, electrical equipment and appliances, and fabricated metal products all went up in August.

Those gains reinforce economists' beliefs that the manufacturing recovery continues to march ahead.

The Federal Reserve, citing some improvements in the economy, boosted short-term interest rates earlier this week by one-quarter percentage point to 1.75 percent, the third rate increase since June when the Fed's current rate-raising campaign got under way.

Fed policy-makers said the economy, after moderating earlier this year in part because of soaring energy prices, had appeared to regain some strength.

The economy is a premier issue on the campaign trail. President Bush and Democratic opponent, John Kerry, hold divergent views on how the economy and the job market are doing. Bush says his tax cuts have helped the economy rebound. Kerry says the president's tax cuts have mainly benefited the wealthy and plunged the government's balance sheets deeper in the red.

Congress approved legislation on Thursday that would extend several popular middle-class tax cuts, handing Bush a big legislative victory as Election Day draws closer.