Demand for factory goods slips

Wed Jul 27, 2011 3:21pm EDT
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By Lucia Mutikani and Mark Felsenthal

WASHINGTON (Reuters) - Demand for long-lasting U.S. manufactured goods fell in June and economic activity across much of the nation slowed through mid-July, casting doubt over how quickly the economy might escape its soft patch.

The Federal Reserve said on Wednesday the recovery lost steam in eight of 12 regions it tracks in recent weeks, with hiring modest, wages soft and price pressures subdued.

"Economic activity continued to grow; however, the pace has moderated in many districts," the Fed said.

Separately, the Commerce Department said weak receipts for transportation equipment pushed down durable goods orders 2.1 percent last month after a 1.9 percent increase in May. A closely watched reading on business spending plans also fell.

Excluding transportation, orders edged up just 0.1 percent.

"We're getting confirmation that this is more than just a soft patch in the first part of the year, that it's a more fundamental slowdown triggered in part by the political environment and jittery markets," said Michelle Meyer, an economist at Bank of America Merrill Lynch.

Economists said the drop in the so-called core category of factory orders that is used as a proxy for business spending plans was troubling and could yield slower growth in spending by businesses on equipment and software in the third quarter.

That measure -- non-defense capital goods orders excluding aircraft -- slipped 0.4 percent last month after a 1.7 percent rise in May.   Continued...

<p>Washers and dryers are seen on display at a store in New York July 28, 2010. REUTERS/Shannon Stapleton</p>