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Durable-goods report shows economy is slowing

(MoneyWatch) Economic troubles in Europe and China continue to affect the U.S., causing demand for long-lasting domestic manufactured goods to drop at the fastest rate in three years.

March orders for U.S. durable good were off 4.2 percent, the largest decline since January 2009, the Commerce Department reported Wednesday. This represents a steep drop from February, when orders rose 1.9 percent. Much of the decline stems from falling demand for commercial aircraft. Transportation equipment orders were off 12.5 percent, the biggest decrease in this sector since November 2010.

Along with shrinking demand for aircraft, U.S. auto manufacturing has slowed off after an impressive start to the year. March orders for cars and vehicle parts increased only 0.1 percent after a 2 percent rise the previous month. Yet even with this drop in the first quarter of the year, cars sold at the fastest pace in four years, according to industry data.

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The slowdown was not limited to transportation. Companies also ordered less machinery and other equipment in March, usually a sign of slowing factory output. Excluding transportation, orders for goods meant to last at least three years fell 1.1 percent after a 1.9 percent rise in February. Economists had been expecting this category to increase 0.5 percent.

The Commerce Department data is another sign that manufacturing continues to slow. Industrial production in March was flat, the second straight month that the sector is losing steam. The Federal Reserve also has reported weakening regional factory activity in April.

March saw a major decline in another key economic indicator: Orders for non-defense capital goods excluding aircraft. Those orders, which indicate future business investment in things like computers, engines, and communications equipment, decreased 0.8 percent after a revised 2.8 percent increase the prior month. The February gain was previously estimated at 1.7 percent.