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Manufacturing seen stronger despite fall in durable goods

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

The Commerce Department reported yesterday 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.

On Wall Street, the Dow Jones industrials average gained 8.34 points to close at 10,047.24.

In the manufacturing report, 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 improvements in the economy, boosted short-term interest rates 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.

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