Orders for U.S. durable goods dropped more than forecast in April, reflecting less demand for aircraft and disruptions in supplies of auto parts stemming from the earthquake in Japan. Bookings for goods meant to last at least three years fell 3.6 percent, the most since October, after a 4.4 percent jump in March, a Commerce Department report showed today in Washington. Economists projected a 2.5 percent drop in April, according to the median forecast in a Bloomberg News survey. A measure of demand for business equipment declined by the most this year. Bookings for Boeing Co. (BA) aircraft slumped last month and vehicle makers slowed production due to a components shortage that may be short-lived as Japanese manufacturers recover. At the same time, rising overseas sales at Deere & Co. (DE) and General Electric Co. (GE) indicate factories will keep expanding. There is “a slowing, but not a dramatic slowing in manufacturing,” Bricklin Dwyer, an economist at BNP Paribas in New York, said before the report. “The inventory rebuilding cycle has tapered off and now we have a normalization. Manufacturing will still be an important component of growth going forward.” Orders excluding the volatile transportation equipment category decreased 1.5 percent in April after a 2.5 percent gain. The median projection in the Bloomberg survey was for a 0.5 percent rise. Estimates of total durable goods orders in the Bloomberg survey of 81 economists ranged from a drop of 5.7 percent to a gain of 2 percent. Economists’ forecasts for orders excluding transportation ranged from a decline of 1.2 percent to an increase of 1.8 percent. Boeing Orders Chicago-based Boeing, the world’s largest aerospace company, said it received two orders last month compared with 98 in March. Industry data may not correlate precisely with the government statistics on a month-to-month basis. Today’s report showed a 30 percent slump in civilian plane orders and an 8.9 percent drop in military aircraft. Total orders excluding military equipment decreased 3.6 percent in April. A recurring pattern of declines in equipment orders at the start of a quarter probably also helped depress the April figures, economists have said. Non-defense orders for durable goods excluding aircraft, items such as computers, engines and communications gear, decreased 2.6 percent in April, more than the median projection of a 2.1 percent drop according to the Bloomberg survey. These orders increased 5.4 percent a month earlier. Since the end of 2005, these bookings have dropped in the first month of a quarter in all but three instances. Machines, Electrical Equipment Demand fell for machinery, fabricated metals, electrical equipment and computers and related products, today’s report showed. Shipments of non-defense capital goods excluding aircraft, used in calculating gross domestic product, decreased 1.7 percent after rising 3.7 percent in the prior month. Disruptions related to the March earthquake and tsunami in Japan led to a plunge in U.S. automobile output, causing industrial production to stall in April, a Federal Reserve report showed last week. Today’s report showed bookings for motor vehicles and parts dropped 4.5 percent in April, the most since August 2010, after a 6.6 percent gain. Economists at JPMorgan Chase & Co. in New York yesterday cut their second-quarter U.S. growth projection to 2.5 percent from a previous estimate of 3 percent. Second Quarter “The main factor behind our revision is weaker output of the auto vehicle sector,” JPMorgan’s chief U.S. economist Michael Feroli wrote in an e-mail. Part of the slowdown in production is due to supply disruptions caused by the disaster in Japan, he said. Other data showed manufacturing in the Philadelphia region grew in May at the slowest pace in seven months, while a measure of the industry in the Richmond, Virginia, region showed contraction. The Federal Reserve Bank of Richmond’s gauge dropped to minus 6 this month, the lowest since April 2009. Negative figures indicate manufacturing was shrinking. Still, overseas sales and corporate investment may be a backstop for manufacturers in coming months. Deere, the world’s largest farm-equipment maker, this month raised its fiscal 2011 earnings forecast amid increasing global demand for agriculture and construction equipment. General Electric’s operating profit growth will accelerate in this year’s second half, and a pickup in sales of energy- efficient products such as gas turbines will help to drive earnings gains next year, according to Chief Executive Officer Jeffrey Immelt. GE Upbeat “Our 2011 framework is turning positive and we see when we look at incoming orders and things like that, there’s nothing to derail that on a global basis,” Immelt, who also is chairman of Fairfield, Connecticut-based GE, said at a conference on May 18. “We’re very well positioned for 2012 and beyond.” Economists project that even with smaller gains, manufacturing will contribute to economic growth this year. Federal Reserve officials are discussing strategies to begin tightening policy after completing the purchase of $600 billion in U.S. Treasuries by the end of June. Federal Reserve Bank of St. Louis President James Bullard said that while first-quarter growth was a disappointment, the slow pace isn’t likely to last. “I think the economy will be reasonably robust in the second quarter and the second half of the year,” he said in a May 23 speech. Manufacturing has been “fairly good” and household spending has “held up well,” he said. To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

Source