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Businesses cut orders for durable goods in April

WASHINGTON — Businesses cut back on their orders for heavy machinery, computers, autos and airplanes in April, reducing demand for long-lasting manufactured goods by the largest amount in six months.

Orders for durable goods fell 3.6 percent, and a key category that serves as a proxy for business investment was down 2.8 percent, the Commerce Department reported Wednesday.

The weakness was widespread across a number of industries as the impact of supply disruptions stemming from the Japanese earthquake in March rippled through U.S. manufacturing.

Demand for autos, auto parts, steel, computers and electronic equipment all fell, and those declines were attributed in part to difficulty in getting critical component parts from Japan, where manufacturing has been disrupted by the March 11 earthquake and tsunami and nuclear plant disaster.

Many analysts viewed the setbacks as temporary, but said they could dampen manufacturing for several months, until U.S. companies find alternative supply sources.

“We think the disruptions from Japan will be temporary. Manufacturing will still be a bright spot for the economy this year,” said David Wyss, chief economist at Standard & Poor’s in New York.

Jennifer Lee, senior economist at BMO Capital Markets, said that the April durable goods report was just another sign that “the U.S. economy is encountering its fair share of speed bumps” at the moment.

Strong demand domestically and overseas has kept U.S. factories humming, making manufacturing one of the strongest sectors of the economy since the recession ended in June 2009. The overseas demand has been supported by a weaker dollar, which makes U.S. products cheaper in foreign markets.

U.S. factories have added 167,000 jobs over the past six months, the best stretch of hiring gains in manufacturing since 1997.

The April decline left orders at $189.9 billion, still 22.5 percent below where orders were in December 2007, the month the recession began. However, the April level is 27.7 percent above the recession low hit in April 2009.

The big drop last month came following a 4.4 percent increase in March, a gain that was revised up from a previously reported 2.9 percent increase.

In addition to the weakness in autos, demand for commercial aircraft fell 30 percent in April. Analysts had expected a big drop in this highly volatile category because new orders at Boeing slowed sharply in April.

Orders for nondefense capital goods excluding aircraft, a category viewed as a good indication of business investment plans, fell 2.6 percent in April after a big 5.4 percent rise in March. Despite the April drop, economists are forecasting strong gains in business capital spending for the rest of this year as companies boost purchases of equipment to take advantage of a one-year tax break that Congress passed in December.

Excluding all transportation categories, orders would have been down 1.5 percent in April after rising 2.5 percent in March.

Other industries seeing a drop in demand in April included primary metals such as steel, down 1.5 percent, and computers, down 4.4 percent. Demand for machinery fell 3.4 percent in April.