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Factory Orders Fall 2.3 Percent

May 26, 1999

WASHINGTON (AP) _ Orders to U.S. factories for big-ticket manufactured goods fell a sharp 2.3 percent in April, the second drop in the past three months, led by a steep decline in demand for autos and other transportation equipment.

The Commerce Department said today that orders for durable goods, items expected to last three or more years, declined by $1.7 billion last month to a seasonally adjusted $194.4 billion.

The 2.3 percent decline followed a solid 2.7 percent increase in March and was the biggest setback since a 3.9 percent fall in February.

The big drop off caught analysts by surprise. They had been expecting a 0.4 percent gain in durable goods orders for April, reflecting strength in the overall economy.

Despite the fact that a global currency crisis has pushed one-third of the world into recession, the U.S. economy has been forging ahead, bolstered by the lowest unemployment rates in three decades and strong consumer spending in such areas as housing.

However, American manufacturers and farmers have been battered by the global trouble as they have suffered steep declines in their exports that have sent the U.S. trade deficit to record levels.

The loss of export markets and increased competition from lower-priced imports has contributed to a drop of more than 400,000 jobs in manufacturing over the last year.

One of the industries suffering the most has been steel, which has seen a flood of cheap imports from countries such as Japan. But in today’s report, the government offered a glimmer of hope that the worst may be over.

Primary metals, the sector which includes steel, saw orders increase by 1.3 percent in April following a 0.6 percent decline in March.

Overall, the 2.3 percent April drop in durable goods orders was led by a sharp 12.4 percent fall in demand in the transportation sector, which the government said included decreases in all components including autos and aircraft.

Excluding the big drop in the transportation, orders would have risen by 0.9 percent. That compared to a 2 percent increase excluding transportation in March.

Orders for industrial machinery rose by 3.5 percent in April, the fourth increase in this sector in the past six months.

Orders for electronic and other electrical equipment were down 0.7 percent in April following a big 4.5 percent March increase.

Shipments of big-ticket durable goods, a good sign of current demand, were down 0.6 percent in April after having risen 1.9 percent the previous month.

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