Factory Orders Drop in April

Businesses will need to pick up the pace of investment in coming months to help the economy overcome a lingering housing slump, economists said. The slowdown in spending during the month may be short-lived as companies rebuild inventories and invest in more efficient equipment in coming months, supporting the Federal Reserve's forecast for ``moderate'' economic growth.

“Companies still have strong profits and they're sitting on a lot of cash, so I think business spending will get stronger,'' Tim Rogers, chief economist at Briefing.com in Boston, said before the report. “The return of business investment will be key'' to second-half growth prospects.

Factory orders were forecast to fall 1.2 percent after a gain of 0.3 percent reported earlier for April, according to the median estimate in a Bloomberg survey of 67 economists. Forecasts of ranged from a 1.9 percent decline to a gain of 0.5 percent.

Orders for durable goods, which make up about 55 percent of factory demand, fell a revised 2.4 percent after a 1 percent gain in April. The government last week, in a preliminary estimate, reported a 2.8 percent decline in durables orders for May.

Orders for capital goods excluding aircraft and military equipment, a measure of future business investment, fell 2.1 percent after rising 2.0 percent. The Commerce Department had previously estimated a 3 percent drop. Shipments of these goods, part of the government's calculation of gross domestic product, rose 0.1 percent after a gain of 0.9 percent in April.