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Originally published March 26, 2014 at 6:49 AM | Page modified March 26, 2014 at 8:11 AM

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Durable goods orders up, but key category weakens

Orders to U.S. factories for long-lasting manufactured goods rose in February by the most in three months, but a key category that reflects business investment fell sharply. This category fell 1.3 percent, the second setback in three months.


AP Economics Writer

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WASHINGTON —

Orders to U.S. factories for long-lasting manufactured goods rose in February by the most in three months, but a key category that reflects business investment fell sharply. This category fell 1.3 percent, the second setback in three months.

Economists said the weakness in business investment might reflect the severe winter, which led some industries to put modernization and expansion plans on hold.

Overall orders for durable goods rose 2.2 percent after a 1.3 percent drop in January, the Commerce Department said Wednesday. The February increase was driven by a surge in orders for commercial aircraft, a category that tends to fluctuate sharply from month to month.

Joel Naroff, chief economists at Naroff Economic Advisors, said he expected economic growth to slow sharply in the January-March quarter, reflecting the disruptions caused by the harsh weather, before recovering in coming months.

"The rebound could be huge once spring actually appears," Naroff said.

A 13.6 percent jump in demand for commercial aircraft followed a 22.1 percent plunge in the previous month. Orders for motor vehicles and parts showed a solid gain of 3.6 percent in February after a 1.9 percent fall in January.

Demand also rose for primary metals such as steel. Orders for machinery fell 1.5 percent. Demand for computers fell 0.5 percent and for communications equipment 2.7 percent.

Many economists think manufacturing output will strengthen in spring, reflecting better weather after winter storms disrupted production at some factories.

The Institute for Supply Management's gauge of manufacturing activity expanded faster in February as companies received more orders and boosted their stockpiles. Its manufacturing index rose to 53.2 in February from 51.3 in January. That only partially reversed a 5-point drop in January. Any reading above 50 indicates that manufacturing is expanding.

The ISM index had risen for six straight months until falling slightly in December and taking a big tumble in January as heavy snow caused factories to close.

The bad weather depressed purchases of homes and autos, causing factories to trim their production schedules for autos, furniture and appliances in January. But the Federal Reserve said factory output rebounded in February by the largest amount in six months.

Analysts estimate that the economy slowed to an annual growth rate below 2 percent in the January-March period. But they're forecasting that the growth rate will rebound to around 3 percent for the rest of the year. If that occurs, it would be the fastest annual economic growth since 2005.



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