Orders for Durable Goods Fall in April

Orders to factories for big-ticket goods fell sharply in April after posting a strong gain in the previous month, reflecting the sometimes bumpy recovery navigated by the nation’s manufacturers.

The Commerce Department reported Wednesday that orders for durables -- costly manufactured goods expected to last at least three years -- dropped by 2.9% last month, marking the biggest decline since September 2002.

But April’s slackening in demand for big-ticket goods came after sizable gains in February and March, when orders went up by 3.9% and a strong 5.7%, respectively.

In other economic news, new-home sales fell by 11.8% in April from the month before to a seasonally adjusted annual rate of 1.09 million units, the lowest level since November, the department said in a second report.

The decline, which followed a big 9.7% jump in March that left sales at a record-high pace of 1.24 million units, came as mortgage rates climbed. The average rate on a 30-year mortgage in April was 5.83%, up from 5.45% in March.

David Seiders, chief economist at the National Assn. of Home Builders, didn’t see the drop in April’s sales as worrisome. Looking ahead, he believes that an improved job climate should help offset the effect of higher mortgage rates, making for healthy housing activity this year.

On the manufacturing front, economists were predicting a drop in big-ticket orders for April given the robust demand in March, but they were forecasting a smaller 0.8% decline.

Although the larger-than-expected drop was disappointing, it was viewed as a temporary pause rather than a harbinger of an unraveling of the recovery in the manufacturing sector.

“Manufacturing is recovering well, and I fully expect that to continue for many months,” said economist Ken Mayland, president of ClearView Economics. Even with the drop in April, orders for big-ticket goods are up an impressive 12.4% from a year ago, he pointed out.

Other recent reports, including one released by the Federal Reserve this month, suggested that manufacturing activity was healthy in April.

In Wednesday’s report, the decline was led by a 4.7% drop in demand for transportation equipment, including cars and airplanes. Factories saw demand for those products increase by 4.1% in March.

Orders also fell in April for machinery, fabricated metal products and primary metals, including steel. Orders for communications equipment, computers, electrical equipment and appliances, however, all posted solid gains.