Bloomberg News

Orders for Durable Goods in U.S. Probably Decreased in August

September 28, 2011

Sept. 28 (Bloomberg) -- Orders for U.S. durable goods probably fell in August as a plunge in stock prices and growing concern over the European crisis raised concern the economy will slow, economists said before a report today.

Bookings for goods meant to last at least three years fell 0.2 percent after a 4.1 percent gain the prior month, according to the median forecast of 77 economists surveyed by Bloomberg News. Orders excluding the volatile transportation category also fell 0.2 percent, according to the survey.

Manufacturers are facing a slowdown in consumer spending, which accounts for about 70 percent of the economy, leaving companies like General Electric Co. depending on sales to China, India and other emerging markets. Less growth in the U.S. also raises the threat that companies will cut capital spending, one of the few remaining bright spots in the recovery.

“There is more caution out there for the manufacturing sector,” said Jonathan Basile, an economist at Credit Suisse in New York. “That translates into softness as financial risk increased.”

Estimates for overall orders ranged from a 3.4 percent drop to a 2.7 percent increase. Forecasts for bookings excluding the volatile transportation category ranged from a decline of 2.3 percent to an increase of 0.8 percent. The Commerce Department’s report is due at 8:30 a.m. in Washington.

Recent data showed manufacturing kept slumping in September. New York-region factories shrank for a fourth straight month and manufacturing in the Philadelphia area contracted for a third time in four months, according to reports from the Federal Reserve. The Institute for Supply Management’s factory production and orders indexes for August both showed contraction.

Growth Leaders

Any further weakening in manufacturing would be more of a concern as much of the growth in the second quarter came from corporate investment and trade as consumer spending stagnated.

Shares of FedEx Corp., operator of the world’s biggest cargo airline, fell to a two-year low last week after cutting its full-year profit forecast amid declining demand in the U.S. and Asia.

“From talking to our customers, -- the retailers, the manufacturers and so forth -- the primary driver of the reduced demand is the lower sales of electronic products,” Chief Executive Officer Fred Smith said on a conference call. “We expect sluggish economic growth will continue.”

Overseas sales remain a source of strength for manufacturers like General Electric.

‘Robust Demand’

“At a time of, I would say, global volatility, we still see robust demand for our infrastructure products,” Jeffrey Immelt, chairman and chief executive officer of GE, said Sept. 26 in Pune, India. “We still feel quite good about our prospects on a global basis.”

The Federal Reserve’s policy-setting committee on Sept. 21 said economic growth “remains slow” even as “business investment in equipment and software continues to expand.”

“There are significant downside risks to the economic outlook, including strains in global financial markets,” it said.

Stocks of machinery makers have fallen more than the broader market in the last two months. The Standard & Poor’s Supercomposite Machinery Index has dropped 23 percent since July 22, when European default and U.S. debt-ceiling concerns began heating up, while the S&P 500 Index decreased 13 percent.

--With assistance from Chris Middleton in Washington. Editors: Carlos Torres, Gail DeGeorge

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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