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MARTIN CRUTSINGER

Friday, February 24, 2006

WASHINGTON — Orders to U.S. factories for big-ticket manufactured goods fell by the largest amount in 5½ years in January as demand for commercial aircraft suffered the biggest setback in seven years, the government reported Friday.

The Commerce Department said that orders for durable goods, everything from computers to cars, fell by 10.2 per cent last month, a much bigger decline than had been expected.

The weakness was led by a 68.2 per cent drop in orders for commercial aircraft reflecting a falloff in sales at Boeing Corp. after two very strong months. Analysts said the overall decline overstated the weakness in manufacturing because it was so heavily influenced by the volatile aircraft sector.

Excluding airplanes, cars and other transportation products, orders posted a solid 0.6 per cent rise after an even larger 1.9 per cent increase in December.

While the economy slowed dramatically to a growth rate of just 1.1 per cent in the final three months of last year, economists are looking for a sizable rebound in the first three months of 2006, with some forecasting growth will top 5 per cent at an annual rate.

Part of that strength is expected to come from manufacturing, which is expected to do well as businesses, bolstered by rising sales and strong profits, step up spending to expand and modernize.

Orders for non-defence capital goods, considered a good barometer of business investment plans, fell by 20 per cent in January. However, most of that weakness reflected the drop in airplane orders. Excluding aircraft, non-defence capital spending was down a more modest 0.4 per cent following a big 5 per cent jump in December.

For January, total orders fell by $23.6-billion to $207.2-billion. The 10.2 per cent decline was the biggest since a 14.2 per cent drop in July 2000.

The 68.2 per cent fall in commercial aircraft orders was the biggest plunge in this category since an 80.1 per cent drop in December 1998.

Boeing took orders for 39 planes in January, a good showing for January but down from the huge 204 orders booked in the closing weeks of 2005. Orders for defence aircraft also fell in January, dropping by 22 per cent.

Overall, orders for transportation products were down 31.2 per cent to $54-billion. Orders for autos and auto parts fell by 3.3 per cent following a 6.5 per cent rise in December.

Orders for computers were down a sharp 11 per cent in January while orders for machinery fell 2.5 per cent.

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