New orders for long-lasting U.S.-made goods plunged unexpectedly by 2.8 percent in March, the biggest drop since September 2002, as orders for aircraft fell sharply, the government said Wednesday.
Excluding the volatile transportation category, orders for durable goods — pricey manufactured items meant to last three years or more — sank 1.0 percent, the Commerce Department said.
Revisions moved the previous months’ reading lower as well. Commerce adjusted February durable goods orders down to a 0.2 percent decline from a 0.5 percent increase, and revised durable goods orders aside from transportation for that month lower to a 0.2 percent drop from unchanged.
The report offered a generally gloomy picture for factory and business spending plans. Wall Street economists had expected durable goods orders to climb 0.3 percent overall and 0.5 percent excluding transportation.
Coming after recent weak consumer data, economists said the decline in orders could make them rethink their estimates for first-quarter gross domestic product, which will be released on Thursday.
“It’s clearly not a one-month aberration. Gasoline prices are climbing. Three-dollar gasoline is only a week or two away. The slowdown could stretch into the second quarter,” said Christopher Low, chief economist at FTN Financial in New York.
U.S. Treasury debt prices swung higher after surprise slump in durable goods orders. The benchmark 10-year Treasury note price was up 7/32 to yield 4.24 percent. The euro initially rose against the dollar while the greenback fell against the yen.
“A decline of 2.8 percent is a large curve ball at the market,” said Joe Francomano, vice president of foreign exchange at Erste Bank in New York.
However, the aircraft sales could swing upward following an announcement Tuesday by Boeing that Air India would purchase $6.9 billion worth of planes, he added.
The total level of new durable goods orders was at its lowest since June 2004. Durable goods orders excluding defense fell 3 percent, the biggest drop since September 2002.
Civilian aircraft orders slumped 22.7 percent last month after a big rise in February, and defense aircraft orders plummeted 35 percent.
The report suggested businesses were scaling back spending plans last month as orders for non-defense capital goods, excluding aircraft, dropped 4.7 percent. That decline follows a 2.5 percent slide in February.
Demand for machinery dropped 7.6 percent, orders for fabricated metal products fell 0.1 percent.
Among the few bright spots in the report, communications equipment orders rose 5.1 percent and orders for primary metals climbed 1.0 percent.
