WASHINGTON (Reuters) – New orders for long-lasting U.S. manufactured goods recorded their largest decline in six months in April as aircraft and motor vehicle bookings tumbled, pointing to some cooling in factory activity.
The Commerce Department said on Wednesday durable goods orders dropped 3.6 percent, worse than economists' expectations for a 2.2 percent fall. March's orders were revised up to 4.4 percent from a 4.1 percent increase.
While durable goods orders are extremely volatile, details of the report were the latest in a series to indicate the economy remains trapped in the soft patch.
"It's another modestly disappointing data point in a long series of slightly disappointing data points that we've gotten in the last month," said Fred Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
"(It's) not indicative of an economic downturn, just kind of paints a picture that the economy is in a momentary lull."
So far, data ranging from retail sales to industrial production all suggest the economy continued to lose momentum early into the second quarter.
The government is expected to report on Thursday that the economy grew at a still sluggish 2.1 percent annual rate in the first quarter, according to a Reuters survey, rather than the 1.8 percent pace it estimated last month.
Manufacturing activity, which has led the recovery, has been dampened somewhat by a shortage of motor vehicle parts following an earthquake in Japan.
U.S. stock index futures extended losses on the data, while government bond prices weakened slightly. The dollar held gains versus the euro and the yen.
Orders last month were pulled down by a 4.5 percent fall in motor vehicle bookings, the largest decline since August, likely tracking an 8.9 percent dive in auto production during that month.
U.S. manufacturing contracted for the first time in 10 months in April as a result of supply chain disruptions in the wake of the March earthquake.
Orders were also weighed down by a 30 percent plunge in volatile aircraft bookings. Boeing took in just two aircraft orders, sharply down from the 98 it received in March, according to information posted on the plane maker's website.
Excluding transportation, durable goods orders unexpectedly fell 1.5 percent after a revised 2.5 percent rise in March, previously reported as a 2.3 percent increase. Economists had expected this category to rise 0.5 percent.
The report showed weakness across the board, with big declines in orders for machinery, capital goods, defense aircraft, electronic equipment and computers. However, orders for computers and electronic products rose.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 2.6 percent last month after an upwardly revised 5.4 percent increase in March.
"The April level is about where it was in the first quarter so it suggests that firms' capital spending inclinations are pretty flat or sluggish in the second quarter," said Cary Leahey, a senior economist at Decision Economics in New York.
Economists had expected a 0.2 percent gain from a previously reported 4.3 percent rise.
Shipments of non-defense capital goods orders excluding aircraft, which go into the calculation of gross domestic product, fell 1.7 percent.
(Reporting by Lucia Mutikani, Additional reporting by Ellen Freilich and Chuch Mikolajczak in New York Editing by Andrea Ricci)
LONDON – President Barack Obama and British Prime Minister David Cameron on Wednesday promised a relentless and punishing pummeling of Moammar Gadhafi's forces in Libya, pressing for his ouster. Obama ruled out a deadline for ending NATO's military assault and said it would be over "in a timely fashion."
"There will not be a let-up in the pressure we are applying" on Gadhafi, the visiting president said Wednesday at a joint news conference with Cameron, ahead of an address that Obama was to make to both houses of the British Parliament.
"Ultimately this is going to be a slow, steady process in which we're able to wear down the regime forces," Obama said.
"I believe that we have built enough momentum that, as long as we sustain the course, we're on, he will step down," the president said.
Cameron rallied behind Obama's approach, saying what was needed in Libya was "patience and persistence."
In a wide-ranging question and answer session that exposed a disagreement over Mideast peacemaking strategy, Obama and Cameron reaffirmed their joint resolve on Libya. The statements of mutual support came despite complaints among some NATO countries about the reduced U.S. role since NATO took the lead after the initial days of the two-month-old campaign against Gadhafi.
"We've been extraordinarily successful in avoiding civilian casualties," Obama said at one point. And he once again ruled out ground forces in Libya. "That means that sometimes we may have to be more patient than people would like," he conceded.
Said Cameron: "I would agree that the two key things here are patience and persistence." He said "we're extremely strong together in wanting to see the same outcomes."
France among other NATO countries has pushed for a more aggressive military approach in Libya, but Obama gave no indication that increased firepower would be forthcoming from the U.S. even though officials in some allied nations would like to see that.
At the same time, the president said the U.S. is "strongly committed to seeing the job through, making sure that, at a minimum, Gadhafi doesn't have the capacity to send in a bunch of thugs to murder innocent civilians and to threaten them."
The international community has stepped up both the air campaign and diplomatic efforts against the regime in a bid to break a virtual stalemate between the rebels in the east and Gadhafi, who maintains a stranglehold on most of the west.
The military campaign in Libya began with what seemed a narrowly defined mission: to enforce a no-fly zone and protect civilians from attack. Two months later, the campaign has evolved into a ferocious pounding of the country's capital, Tripoli, in what appears an all-out effort to oust Gadhafi. But that goal remains elusive.
The Libyan opposition remains weak. NATO, the North Atlantic military alliance which took over command of the campaign from the U.S. on March 31, appears to have no clear exit strategy. Two of the allies, Britain and France, have descended into public squabbling over bringing the fight closer to Gadhafi with attack helicopters. And the French foreign minister said Tuesday his country's willingness to continue the campaign was not endless.
On Middle East peace, Cameron strongly supported Obama's recent speech in which the president explicitly endorsed a return to Israel's pre-1967 borders, along with mutually agreed-to land swaps, as the starting point for peace talks with Palestinians.
That stance from Obama initially angered Israel, although nerves have calmed as Obama emphasized the nuances of his position as representing no departure from the stances of previous U.S. administrations.
But differences between the allies emerged on the question of the Palestinians' unilateral pursuit of statehood at the United Nations.
Obama strongly opposes the move, as he reiterated Wednesday.
"The only way that we're going to see a Palestinian state is if Israelis and Palestinians agree on a just peace. And so I strongly believe that for the Palestinians to take the United Nations route, rather than the path of sitting down and talking with the Israelis, is a mistake. And it does not serve the interests of the Palestinian people," Obama said.
"The United States will continue to make that argument both in the United Nations and in our various meetings around the world."
European countries have been more open to a statehood bid by the Palestinians, and Cameron declined to commit himself one way or the other.
"We don't believe that the time for making a decision on the UN resolution — there isn't even one there at the moment — is right yet," Cameron said. "We want to discuss this within the European Union and try to maximize the leverage and pressure the European Union can bring on both sides to get this vital process moving."
On another matter, Obama said the U.S. is increasing pressure on Syria's President Bashar Assad and his regime, which has been attacking protesters there.
The news conference came on day three of Obama's four-country, six-day Europe tour, which began in Ireland and will take him to France on Thursday for an economic summit, and finally to Poland.
Two years ago I wrote a column about what I would say to the MBA of 2009 if I were selected to deliver a commencement address. That graduation occurred just as the savage effects of the Great Recession were unfolding. Millions had lost their jobs and millions more would fear losing them. Business confidence was nonexistent. More often than not, you heard executives say they'd not seen anything like that before.
So to the MBA class of 2011, let me offer my congratulations. We have turned the corner on the Great Recession. Companies are back in the black and even giving bonuses. Yet too many millions remain unemployed or underemployed.
The world that newly minted MBAs -- my son is one -- inherit is different from the one my generation faced. Yours is a world of diminished expectations. In some ways, this is very good. You have experienced the worst economic meltdown since the 1930s and you have survived. In a way you have more in common with your
grandparents' and great-grandparents' generations. You have known hardship. Sadly, many your age have gone to war.
Today, the world differs greatly from the one our ancestors lived in during the last cataclysmic economic meltdown, the Great Depression. There is a curious though oppositional parallel, however. President Franklin D. Roosevelt created the New Deal to rescue the nation. Prior to FDR, no one expected the government to do much of anything. Today the government is expected to do much, but it has far less -- its budget is crimped by entitlements, defense, and debt service.
Once again it will fall to private enterprise to right not just the economy, but the entire nation and ultimately the world. You will be the generation challenged to accomplish that. The challenge may seem overwhelming, though you have the smarts to do it. Brainpower is not enough; you need to engage with others to make it happen.
Let me offer two suggestions.
One, be pragmatic. The engine of American enterprise is not our smarts; it's our can-do spirit. We know how to make things work. One of my favorite stories comes from car-industry legend Bob Lutz, a veteran of each of the Detroit Three as well as BMW (). When asked why Chrysler, for whom he worked in the eighties, had bought American Motors, Lutz said -- partly tongue in cheek -- that American Motors (which had been in financial distress for years) had been doing so much with so little that the expectation was it might make things out of nothing. Chrysler incorporated AMC's pragmatism into its operations and helped save itself one further time.
FDR's mantra was: Try something, try anything, but by gosh, do something. Don't expect perfection. Make things happen. That is what pragmatists do.
Two, be willing to compromise. Too bad the word has fallen into disrepute, chiefly due to the
ideologues who pose as politicians. They have conflated principles with policies and made it shameful to cooperate and collaborate. Fortunately, the business world does not heed Washington in this regard.
Savvy businesspeople make collaboration an art form. Today we see strategic alliances among competitors. In some fields it is not uncommon for competitors to be one another's customers, as well as vendors, and still maintain competition in certain areas. Supply-chain integration is all about compromise, working with the best providers to help you deliver the best products and services.
As bright and savvy -- not to mention aggressive and ambitious -- MBA graduates, you can find many more things to add. And as you make your way in the world, remember to stop and enjoy it. Work is hard; that's why they call it work. You are entitled to take some time off.
As an MBA graduate, you have proven that you know how to
grind it out. Now show us how you can do something else. Spend time in the pursuits that interest you most. Pursue your passion. Indulge in free time. Do not overlook your family. And find ways to give back to your community. The final two are tall orders, yes. As you have done with challenges in the past, you will figure out how to do it.
Good luck and Godspeed. The world is counting on you to succeed.