Durable goods: Biggest drop in 6-plus years

NEW YORK (CNNMoney.com) -- Orders for expensive items like cars and refrigerators posted the biggest drop in more than six years in October, raising concerns about a weakening of the U.S. economy.

Orders for durable goods sank 8.3 percent last month, the government reported Tuesday, after jumping 8.7 percent in September. Economists surveyed by Briefing.com had forecast a 5.0 percent drop in demand for the durables, big-ticket items such as appliances, computers and vehicles that last at least three years.

Durable goods orders are volatile and often swing widely from month to month, and much of October's drop came from lower demand for commercial jets. But even excluding transportation, new orders fell 1.7 percent, while economists had been expecting a 0.2 percent rise minus transportation.

Excluding defense items, new orders fell 6.4 percent. Economists had forecast a 0.3 percent rise in that measure.

Another reading that economists say is a good indication of business spending - orders for non-defense capital goods excluding aircraft - fell 5.1 percent. Economists had forecast a 0.3 percent rise that category.

The technology sector got hit particularly hard last month. Orders for computers and electronic gear declined 10.2 percent, with computers and related products tumbling 25.6 percent.

New orders for non-defense aircraft also took a big hit, falling 44.5 percent. Large month-to-month swings in orders for items such as commercial jets is one of the factors that makes the durable goods orders report one of the most volatile economic readings.

Still, there was one sign of strength in the report. Unfilled orders for manufactured durable goods in October, which had already been up 16 of the previous 17 months, increased another 1.2 percent, to the highest level since the series was first stated on the current basis in 1992. And year-to-date orders are up 8.3 percent, while non-defense capital goods excluding aircraft is up 9.7 percent over the first 10 months of the year.

"The report is rife with contradiction," said economist Robert Brusca of FAO Economics. "No doubt there is weakness there but the strength in unfilled orders speaks of an underlying demand as well."

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