Nov. 28 (Bloomberg) -- Orders for U.S. durable goods fell more than forecast in October, signaling companies are losing confidence the economic expansion will be sustained.

The decline bears out Federal Reserve Vice Chairman Donald Kohn's warning today that market ``turbulence'' may discourage businesses and consumers from spending. Less investment adds to risks that growth will falter and force the central bank to cut interest rates again, economists said.

``It's pretty weak,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, who projected orders would drop 0.5 percent. ``We do expect growth to be weak for the next couple of quarters.''

The 0.4 percent drop in demand for cars, planes and other items made to last several years followed a revised 1.4 percent decrease in September, the Commerce Department said today in Washington. Bookings were down for a third straight month, the longest losing streak in more than three years. Excluding transportation, demand fell 0.7 percent.

The dollar pared gains after the report. Economists forecast orders would drop 0.1 percent, according to the median of 76 estimates in a Bloomberg News survey, after a previously reported 1.7 percent decline for September. Estimates ranged from a decrease of 3 percent to 2.8 percent gain.

Investment Proxy

Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, decreased 2.3 percent, the most since February, after a 1.2 percent increase in September that was larger than previously estimated. Shipments of those items, used in calculating gross domestic product, dropped 1.2 percent after rising 1.7 percent in September, which was also more than reported last month.

The economy probably grew at an annual rate of 4.9 percent in the third quarter, a percentage point more than first estimated and the most in four years, according to the median estimate of economists surveyed ahead of revised Commerce Department figures due tomorrow. The revision to September shipments of capital goods may push that forecast even higher.

Growth will probably slow to a 1.5 percent pace this quarter, according to the median estimate in a Bloomberg News survey taken earlier this month. Since then, economists at Bank of America Corp. and Merrill Lynch & Co. have been among those lowering the projected growth rate to less than 1 percent as consumer spending and business investment cool and the housing recession persists.

Bookings excluding defense equipment decreased 0.9 percent. Demand for defense equipment rose 16 percent.

Computer Demand

The drop in total orders was led by an 8.4 percent decline in demand for computers and electronic gear. Bookings for automobiles and commercial aircraft also fell.

Boeing Co., the world's second-largest maker of commercial planes, had orders for 56 aircraft in October, down from 132 a month earlier. Even so, demand this year has reached a record 1,047 planes, the company said on Nov. 21. It increased shipments last month to 42, from 34.

Sales abroad are helping some firms weather slowing U.S. demand.

Rockwell Automation Inc., the world's largest company focused solely on factory controls, said Nov. 12 that overseas sales will rise to the highest level ever this fiscal year. Demand outside the U.S. is expected to increase to 49 percent of the company's total for the year that began in October, from 46 percent last year, Chief Executive Officer Keith Nosbusch said in an interview.

Export Growth

``One of our strategies is to get 50 percent sales growth outside the U.S.,'' said Nosbusch, 56. ``It's important that we diversify our revenue base so that we reduce the cyclicality of our business.''

The Institute for Supply Management's factory report for October showed manufacturing is on the verge of stalling, with the index falling to 50.9. The group's new orders gauge decreased to 52.5 and production dropped to 49.6, contracting for the first time since January.

Regional reports provide a more optimistic look for this month. The Philadelphia Federal Reserve Bank's general economic index unexpectedly rose, to 8.2, and the New York Fed's measure was little changed from its October measure, which was the highest in three years.

To contact the report on this story: Courtney Schlisserman in Washington Cschlisserma@bloomberg.net

Last Updated: November 28, 2007 09:27 EST