Orders for Durable Goods Take a Tumble

[Oct 26, 2007.]

Orders for durable goods slid in August - the largest drop in 7 months. The downturn indicates that the country's industrial sector is facing hard times.

According to the Commerce Department, orders for large-scale items ranging from appliances to planes dropped 4.9% during the summer month. That's the most significant decrease since the beginning of the year, when the rate dropped 6.1%.

Economists had been predicting a much smaller decrease of 3.5% in August. The drop in durable goods orders could be one more sign that recession is on the way. Financial analysts have been concerned that the housing crisis and trouble in the financial markets could lead to a large-scale economic slowdown. So far, that hasn't happened yet, but the decline in demand for durable goods could signal tough economic times ahead. In fact, some economists actually say that there's an even chance of recession in the coming months.

Still, the Federal Reserve's decision to slice a benchmark interest rate could help to revive the economy.

Additional rate cuts may be on the way in October and December when the Fed meets again. The Fed has promised to do all it can to help the nation avoid recession. Still, some observers are wondering if the efforts by the Fed are too little, too late. In fact, it's been predicted that there will be no significant turnaround in the housing market until the middle of 2008.

Economists predict that economic growth in the U.S. will drop to approximately 2% in the last quarter of the year.

While demand increased for big-ticket items such as computers and electrical equipment, it declined for machinery, communications goods, and steel. Meanwhile, the auto industry appears to be experiencing its share of ups and downs. While orders for motor vehicles and parts skyrocketed in July more than 10%, demand plummeted 6.2% in August.

Julie Ann Amos
October 26th 2007

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