US durable goods orders drop 1.3% in April

US manufacturing activity off to strong start in May

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WASHINGTON — U.S. orders for big-ticket manufactured goods dropped unexpectedly in April for the first time in 11 months as a shortage of computer chips disrupted auto production.

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The Commerce Department reported Thursday that orders for factory goods meant to last at least three years fell 1.3% in April after rising 1.3% in March. Transportation orders skidded 6.7%. Excluding transportation, which can swing sharply from month to month, durable goods orders were up 1% in April.

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Factories have been hamstrung by a shortage of supplies as the U.S. economy reopens from the COVID-19 pandemic and demand for goods and services rebounds rapidly. Orders for auto parts, disrupted by a shortage of computer chips, dropped 6.2% in April. Orders for military capital goods dropped 25.8% after falling 11.7% in March.

Economists had expected durable goods orders to rise about 0.7% last month. Despite the unexpected decline, the April report also contained hopeful signs: A category that tracks business investment — orders for nondefense capital goods excluding aircraft — increased 2.3% last month on top of a 1.6% gain in March.

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"The signal for the manufacturing sector is still positive, although supply chain constraints continue to be a headwind, preventing a complete recovery to pre-pandemic levels," Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a research note.

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