American Durable Goods Orders Drop 4.5% in August

(Canadian Business – Associated Press)

U.S. government data show the number of new applications for unemployment benefits jumped last week to its highest level in seven years due to the impact of hurricanes Ike and Gustav and a weak economy.

The U.S. Labour Department reported Thursday that new requests for jobless benefits increased by 32,000 to a seasonally-adjusted 493,000, much higher than analysts' expectations of 445,000.

The two hurricanes added about 50,000 new claims in Louisiana and Texas, the department said. The four-week moving average, which smooths out fluctuations, rose to 462,500.

Meanwhile, orders for American big-ticket manufactured goods plunged in August by the largest amount in seven months as demand for both airplanes and autos fell sharply.

The Commerce Department reported Thursday that orders for durable goods fell by 4.5% last month, far worse than the 1.6% decline that economists expected. It was the biggest setback since a 4.7% fall in January and came after modest increases in the past three months.

The widespread weakness was led by a 38.1% fall in orders for commercial aircraft, the biggest drop in this category in a year. Demand for autos fell by 8.1% – the biggest drop in 19 months – as automakers struggle with the weak economy and falling demand for once-popular trucks and sport utility vehicles.

While manufacturers have struggled with weak domestic demand, especially in sectors linked to housing and autos, some of that drop-off has been offset by strong sales to foreign countries. However, there are concerns that exports could start to falter given spreading weakness in such big overseas markets as Europe and Japan.

For August, the 4.5% drop in orders for durable goods, items expected to last at least three years, left demand at a total $208.5 billion, 1.6% below the year-ago level.

Demand for heavy machinery fell by 6.2% while orders for primary metals such as steel fell by 9.3%, the biggest drop in the metals category in 15 years.

Orders for non-defence capital goods excluding aircraft, considered a proxy for business investment plans, fell by two per cent, a possible sign that businesses, worried by the weak economy, are cutting back on their plans to expand and modernize.

Excluding transportation, orders were down three per cent, much worse than the 0.5% drop that had been expected.