Orders for U.S. durable goods fell for a record sixth consecutive month in January, signaling companies are cutting back on spending as customers worldwide retrench. The 5.2 percent drop was more than twice as large as projected and followed a 4.6 percent decrease the prior month, the Commerce Department said today in Washington. Comparable data began in 1992. Excluding transportation equipment, orders fell 2.5 percent. The credit freeze that pushed the U.S. and overseas economies into a tailspin will cause companies to pare output and trim investment plans. President Barack Obama, in his first month in office, has signed into law a $787 billion stimulus bill to jumpstart the economy and unveiled plans to boost homeowners and unfreeze lending. ``There has been a tremendous loss of confidence in the economy and people don't want to buy big-ticket items,'' Ethan Harris, co-head of U.S. economic research at Barclays Capital Inc., said before the report. ``We're still in this phase of the recession where there is a pretty dramatic pulling-back.'' Economists projected a 2.5 percent drop, according to the median of 71 estimates in a Bloomberg News survey, after a previously reported 3 percent decline in December. Forecasts ranged from declines of 8 percent to 0.5 percent. December's decrease was revised from a previously reported 3 percent drop. Excluding transportation equipment, orders were forecast to fall 2.2 percent after a 3.9 percent decrease. Bookings were valued at $163.8 billion in January, the lowest level since December 2002. Influence on Growth Demand for non-defense capital goods excluding aircraft, a proxy for future business investment, plunged 5.4 percent after falling 5.8 percent the prior month. Shipments of those items, used in calculating gross domestic product, dropped 6.6 percent. Orders excluding defense equipment decreased 2.3 percent and bookings for military gear dropped 35 percent. Transportation equipment demand slumped 13.5, with autos down 6.4 percent for a second month. Commercial aircraft orders surged 82 percent following a 59 percent drop. Today's report showed orders for metals, machinery and computers also dropped. Only communications gear and aircraft advanced. Tight credit and a global recession indicate demand for aircraft is likely to slump in coming months. Boeing Co., whose new 787 Dreamliner is now almost two years behind schedule, said Feb. 19 it lost another order for the plane in the prior week, bringing total cancellations to 33. Canceled Orders ``Cancellations are especially affecting aircraft makers and other heavy industries like mining as customers feel the credit pinch,'' said Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts. Federal Reserve Chairman Ben S. Bernanke told Congress this week that there was a ``reasonable prospect'' the recession would end in 2009 only ``if actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measure of financial stability.'' Economists surveyed by Bloomberg this month forecast the economy will contract 2 percent this year, the most since 1946. The economy shrank at a 3.8 percent pace in the fourth quarter of 2008, led by declines in business and consumer spending and homebuilding. The auto industry has led the recession in manufacturing. General Motors Corp., which is seeking $16.6 billion in new federal loans, said this month it is cutting another 47,000 jobs globally this year, closing an additional five U.S. plants by 2012 and selling or shuttering its Saab, Hummer and Saturn brands as part of a restructuring campaign. `Hang On' ``We will tighten things down and hang on as long as we can,'' GM Chief Executive Officer Rick Wagoner said Feb. 18 in a Bloomberg Television interview. GM has already received $13.4 billion in federal loans since December to stay in business. Housing-related industries are also in a swoon. Caterpillar Inc., the biggest maker of earthmoving equipment, said Feb. 11 it would offer a voluntary retirement package to about 2,000 production employees, in addition to more than 22,000 workers and contractors that the Peoria, Illinois-based company had previously announced it would cut. ``We are taking some very painful assertive actions to be sure we right-size our costs,'' Caterpillar Chairman Jim Owens said last month on a conference call. ``If we'd just get the financial market to stabilize globally, this economy wants to grow.'' Today's report also showed order backlogs dropped and companies cut stockpiles. The 0.8 percent decline in inventories was the biggest since September 2003. Unfilled orders fell 1.9 percent, the most since January 2002. Smaller backlogs indicate manufacturing will be slow to recover even after the economy gains traction.

Source