WASHINGTON - U.S. durable goods orders plunged 6.4% in April, the steepest drop in more than eight years, as orders for electronic equipment such as semiconductors fell a record amount and demand for autos weakened.
The drop in orders for items made to last three or more years came after a 4.5% increase in March and was the biggest decline since December 1991, the Commerce Department said.
Excluding transportation equipment, orders also fell 6.4%. This was the biggest decline since July 1989 and came after a 4.5% March increase.
The unexpectedly big decline suggested that increased borrowing costs and shortages of components such as computer chips are slowing the pace of manufacturing growth, analysts said. "It would appear as if the higher interest rates the Federal Reserve has given us could be playing a role on the investment side of the ledger," said Kevin Flanagan, an economist at Morgan Stanley Dean Witter & Co. in New York. Factory deliveries and order backlogs both fell. Shipments dropped 0.8% after rising 2.5% in March. Unfilled orders fell 0.8% after increasing by 1.6%.
Intel Corp., the world's largest maker of computer chips, is among those hindered by shortages. The company, which is sold out of some products because it underestimated demand, said recently that it is spending $2 billion to expand a New Mexico plant.
Friday's government report said that electronic equipment orders slumped 20.1% after a March increase of 8.9%. Electronic goods include communications equipment, appliances, and video equipment, as well as semiconductors, circuit boards, capacitors, resistors, coils, and transformers.
The drop in durable goods orders "is all concentrated in one sector, electronic equipment," said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, N.Y. "This component is very volatile, and the April drop merely reverses the February-March increases."
Orders for nondefense capital goods excluding aircraft - a gauge of business investment plans - rose 1.1% in April after a 4.4% March increase.
Shipments of nondefense capital goods other than aircraft, a measure of business investment that feeds directly into gross domestic product, grew 0.7% in April after a 4% gain the month before.
The department reported that non-residential investment, which includes commercial construction and business equipment and software, rose at a 25.2% annual rate in the first quarter. That's up from a previous estimate of a 17.3% gain.
Analysts expected a 0.5% drop in April orders for all durable goods after a previously reported increase of 3.5% in March. Outside of defense, orders fell 6% in April after a 4.8% rise in March. Transportation orders fell 6.7% in April, including a 4.1% drop in orders for commercial aircraft.