Orders for US long-lasting goods drop 2 per cent in October, signalling caution during shutdown

WASHINGTON – Businesses spent less last month on machinery, computers and most other items, lowering orders for U.S. long-lasting factory goods. The decline suggests companies may have been reluctant to invest during the 16-day partial government shutdown

The Commerce Department said Wednesday that orders for durable goods dropped 2 per cent in October from September. That follows a 4.1 per cent increase in September from August.

Durable goods are meant to last at least three years.

Demand for commercial aircraft plunged nearly 16 per cent last month, accounting for much of the decline. But orders also fell 1.2 per cent in a closely watched category that excludes volatile transportation and defence orders. That was the second straight drop.

Economists pay closer attention to core capital goods because those orders can reflect businesses’ confidence in the economy.

Many companies may have held off placing orders in October, awaiting the outcome of a budget impasse that shut down parts of the federal government.

However, the report conflicts with a private sector survey released earlier this month that showed companies shrugged off the shutdown and boosted orders.

The Institute for Supply Management, a trade group, said factory activity accelerated for the fifth straight month in October to the fastest pace in 2 1/2 years. The survey’s measure of new orders ticked up and production remained strong, though it slowed from the previous month.

Other reports have suggested that manufacturing has picked up since the spring. Strong auto sales and a healthier housing market have pushed up demand for steel and other metals, auto parts, furniture and appliances.

And factory output rose for the third straight month in October, according to the Federal Reserve, driven higher by greater production of primary metals and furniture.

Overseas demand for many goods has also risen as Europe has climbed out of recession, Japan is growing faster and China’s economy has slowed but is still growing at a healthy pace.

Changes in aircraft demand can frequently push the overall figure up or down. Aircraft orders soared 59 per cent in September, accounting for most of the total increase in orders that month.

Boeing says it received orders for 79 planes last month, down from 127 in September.