Durable goods orders fall sharply in Oct

WASHINGTON Wed Nov 24, 2010 8:38am EST

WASHINGTON (Reuters) - New orders for long-lasting U.S. manufactured goods unexpectedly fell in October to post their largest decline in nearly two years and business capital spending plans dropped, according to a government report on Wednesday that pointed to a slowdown in factory activity.

The Commerce Department said durable goods orders tumbled 3.3 percent, the largest decline since January 2009, after surging by a revised 5 percent. Economists had expected orders to be flat in October after a previously reported 3.5 percent jump.

Excluding transportation, orders dropped 2.7 percent, the biggest fall since March 2009, after a revised 1.3 percent increase in September, which was previously reported as a 0.4 percent. Economists had expected orders excluding transportation to rise 0.6 percent in October.

The drop in orders last month was almost across the board, with hefty declines in bookings for machinery, computers, communications equipment and defense aircraft.

Durable goods orders are a leading indicator of manufacturing and the report suggested factory activity could be faltering. Manufacturing has led the economy's recovery from the worst recession since the 1930s.

The Commerce Department report showed non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, dropped 4.5 percent in October after rising by a revised 1.9 percent in September. Markets had expected a 1 percent increase.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

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