New orders for manufactured durable goods in May decreased $6.1 billion, or 2.8 percent, to $213 billion, the United States Census Bureau announced yesterday. This followed three consecutive monthly increases, including a 1.1 percent increase in April. The 2.8 percent drop in demand for goods meant to last several years represents the first drop in four months, after a revised 1.1 percent gain in April that was larger than previously estimated.

The Commerce Department report yesterday was far weaker than analysts had been expecting, with forecasts for a 1.0 percent drop overall and a 0.6 percent increase excluding transportation.

Excluding transportation equipment, orders dropped 1 percent. (Economists prefer to track the durable goods figures excluding transportation because orders for aircraft and automobiles tend to be volatile from month to month, obscuring underlying trends in spending.)

Demand for machinery fell 1.6 percent, and bookings for metals dropped 3.6 percent.

Total orders have never been up for four consecutive months since comparable records began in 1992. The last time bookings for durable goods rose for three consecutive months was April-June 2005.

According to Bloomberg News analysis:

The decline, which was led by fewer orders for aircraft, metals, and machinery, spurred some economists to cut forecasts for economic growth this quarter. Federal Reserve policy makers, who predict a pick up in the pace of economic expansion later this year, are forecast to keep interest rates unchanged when their two-day meeting ends tomorrow.

The May durables orders report runs contrary to other recent indicators showing pickups in business investment and manufacturing. The principal bright spot was an increase in unfilled orders.

Unfilled orders for manufactured durable goods in May, up 24 of the last 25 months, increased 0.8 percent, or $5.8 billion, to $725.3 billion. This followed a 1.9 percent April increase.

Inventories of manufactured durable goods in May, up 15 consecutive months, increased 0.2 percent to $313.2 billion. This followed a 0.4 percent increase in April.

Non-defense new orders for capital goods in May decreased 8.3 percent to $71.8 billion.

Defense new orders for capital goods in May increased 6.7 percent to $8.2 billion.

Although the news of fewer orders for manufactured goods doesn't do anything to brighten the day, there are some steps that can be taken to strengthen the role of manufacturing in the U.S. economy. The National Association of Manufacturers (NAM) offers the following as suggested solutions in the white paper Manufacturing Trade Agenda: Leveling the International Playing Field.

In brief, a selection of NAM recommendations includes the following:

• Open foreign markets through ambitious trade negotiations, meaning that for countries that have created tariffs for U.S. goods, "we would eliminate our already very low tariffs while they would eliminate their high tariffs";

• Harmonize regulatory policies, i.e., continue allowing U.S. manufacturers to use both metric and U.S. measurements on packages;

• Continuation of the trade promotion authority;

• Work to eliminate trade-distorting subsidies;

• Stop trade in illegal and counterfeit goods; and

• Work to convince all countries to let the market dictate currency value rather than be influenced by government intervention.

These are meant to level the international playing field.