Plus: Durable Goods Orders Climb, Jobless Claims Rise and Final Endeavour Launch Postponed.

GDP Growth Slows During January-March Period
The United States economy decelerated in the first quarter, the U.S. Department of Commerce reported last week. Real gross domestic product (GDP) expanded at a 1.8 percent annual rate in the first three months of the year, down from 3.1 percent growth in the fourth quarter of 2010.

Economists surveyed by CNNMoney were predicting growth of 2 percent in the first quarter, while those polled by MarketWatch had expected a slightly weaker 1.7 percent growth rate.

A widening trade deficit, higher commodity prices and decreased federal spending all took a serious toll on the pocketbooks of businesses and households. Consumer spending, which accounts for roughly 70 percent of overall economic activity, grew at a 2.7 percent pace, down from the previous quarter’s 4 percent pace.

The only real positive result in the first quarter was that business spending ramped up, following a significant decline in the fourth quarter. In the early part of 2011, it grew at an annualized pace of $36 billion, due largely to firms replenishing their inventories and purchasing more equipment and software, despite spending less on structures.

Economists are hopeful that the setback will be temporary, and many point to a resurgent manufacturing sector and a slowly improving labor market that’s putting more people back to work, which could boost consumer spending.

Durable Goods Orders Climb in March
New orders for U.S. durable goods rose 2.5 percent in March, following an upwardly revised 0.7 percent increase in February, according to a separate Commerce Department report last week. Excluding the often-volatile transportation sector, new orders rose 1.3 percent.

The value of durable goods orders in March grew $5 billion to total $208.4 billion, marking the third consecutive month of rising demand. Transportation equipment had the largest gain in new orders, rising 5.9 percent to total $54.7 billion, followed by machinery orders, which climbed 4.2 percent to $28.9 billion, and primary metals, which increased 3.9 percent to $24.5 billion.

“Manufacturing has been one of the strongest sectors of the economy since the recession ended in June 2009. Factory growth is being fueled by rising domestic demand and a boom in exports. A weaker dollar has made U.S. goods cheaper overseas,” the Associated Press reports. “Businesses are also benefiting from a one-year tax break designed to spur investment in capital equipment.”

Non-defense capital goods orders — a key gauge for business investment plans and an important factor in calculating GDP — climbed 3.2 percent to $73.3 billion, indicating strong demand for business equipment.

“Corporations are very profitable and have the funds to make equipment purchases without expanding bank debt,” Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI, said in an analysis of the durable goods report. “The need for such investments comes from the sustained economic growth since June 2009, albeit sub-par, and the long neglect given the nation’s stock of machinery and equipment. Repair, replacement and selective upgrading is necessary.”

Meanwhile, durable goods shipments, up five consecutive months, increased 1.8 percent to total $207.3 billion in March. This followed a 0.5 percent gain in February. Transportation equipment also had the largest increase in shipments, rising 3.3 percent to total $51.1 billion.

Jobless Claims Increase Sharply
New initial jobless claims rose unexpectedly in the latest week reported, according to the U.S. Department of Labor. Seasonally adjusted unemployment claims for the week ending April 23 rose to 429,000, a 25,000 increase from the previous week and the third consecutive week claims have remained above 400,000. The four-week moving average also rose, climbing 9,250 to a total of 408,500, the highest reading since February.

The increase in unemployment was unexpected, with economists surveyed by MarketWatch forecasting new claims to drop to 395,000 for the week. Before the recent uptick, initial jobless claims steadily declined since August, dropping below the 400,000 threshold that indicates a stronger job market in early March.

While part of the increase in jobless claims may be attributable to factory shutdowns due to supply disruptions from the disasters in Japan, as well as temporary closings stemming from the Easter holidays, it seems likely that longer-term economic factors are also coming into play.

“The increase could hint that businesses are cutting labor costs to offset the prolonged surge in raw-material costs. But the strength of the U.S. recovery — which slowed in the first quarter — is highly dependent on stronger job growth,” the Wall Street Journal explains. “Although factory surveys and earnings reports have indicated many businesses have already or are planning to raise their selling prices, the increases may not be enough to cover soaring commodity costs. Companies then will look at other costs. That means payrolls.”

Final Endeavour Launch Postponed
NASA postponed the final launch of the space shuttle Endeavour on Friday mere hours before its scheduled liftoff as engineers investigated the failure of a heating circuit serving an Auxiliary Power Unit (APU). Heaters prevent the APU’s hydrazine from freezing while the spacecraft is in orbit. There are two heaters on APU 1, and both are required for operations.

According to the space agency’s website, the issue seems to involve the aft load control assembly-2 (ALCA-2), a box of switches controlling power feeds. “That basically means the power is not getting out to the heaters that weren’t working on launch day,” Mike Moses, chairman of NASA’s Mission Management Team, explained. The plan is to remove and replace the box, but that work and related testing will take several days to complete.

NASA engineers had hoped the orbiter would take off today, but replacing the box has again delayed the launch to an unannounced date no earlier than May 8.

“That doesn’t mean we’re going to go launch on the 8th,” Moses told reporters, “that just means we know right now the 8th is our next available opening.”

For more, see Hightlights: A History of NASA’s Shuttle Program.