Orders for Durables Up 14.9% in 1984 : Sales of Existing Homes Hit Highest Level in 4 Years

Orders to factories for durable goods rose a strong 14.9% in 1984 while sales of existing homes posted their best performance in four years, according to two economic reports released Friday.

The reports capped a week of good economic news that has led many forecasters to boost their estimates of growth in coming months.

The Commerce Department said orders for durable goods--items expected to last three or more years--climbed to a record $1.211 trillion in 1984.

Last year’s gain followed an even stronger 17.1% jump in 1983. The increases marked the best two-year performance since 1977 and 1978, when orders rose by 19% and 18.4%, respectively.

Growth Outlook

Orders for durable goods had fallen 10.2% in the recession year of 1982.

“These back-to-back increases show that we had super growth in the last two years,” said Allen Sinai, chief economist for Shearson Lehman/American Express. He predicted strong growth in manufacturing orders again in 1985 but not another year of double-digit increases.

“I think we will see strength in orders in coming months reflecting the renewed growth in the economy,” he said.

Sinai said that he has now revised his estimate of growth for the first three months of the year to a rate of between 4% and 5%. This is up from his earlier expectation of 3% growth.

Meanwhile, a private housing trade group said sales of existing homes jumped 1.1% in December, pushing sales for all of 1984 to their highest level since 1980.

The National Assn. of Realtors said sales of existing homes hit 2.87 million units last year, a 5.5% improvement over 1983 and 44.1% higher than the recession low point in 1982.

Falling Interest Rates

Housing officials gave credit for the gains to declining interest rates, citing figures from the Federal Home Loan Bank Board that the average interest rate on mortgages closed in 1984 was 12.5%, down from 12.85% in 1983 and 15.38% in 1982.

“Lower long-term interest rates, as well as the widespread use of adjustable-rate mortgages, were the key to helping more families make housing purchases last year,” said David D. Roberts, president of the association and a Mobile, Ala., real estate agent.

In a less optimistic economic development, the federal government reported that its deficit for December was $15.2 billion, putting the red-ink total for the first three months of the current fiscal year 14.4% above a year ago.

Interest payments, already the third-largest spending category, escalated by 23.3% from October through December, compared to the same period a year ago, and the Administration is now braced for a record deficit this year approaching $210 billion.

The Commerce Department report on new orders for durable goods said the big 1984 increase came despite decided weakness in orders in the last half of the year.

In December, orders dropped 2.1%, the third decline in the last four months. New orders last month totaled $101.9 billion.

However, Commerce Secretary Malcolm Baldrige pointed out that the December decline resulted primarily from a 17.6% dip in the highly volatile category of defense orders.

Defense orders had surged up by 110.4%in November and analysts had not expected that level to be maintained. Without the drop in defense, new orders would have dipped a smaller 0.3% in December.b

Michael Evans, head of Evans Economics, a private Washington forecasting firm, said that while the December decline was more than had been expected, it was likely to be revised upward when more information is gathered. He predicted that the economy will advance at a strong rate of 4% in the first half of this year and an even better 5% in the second half.

On Tuesday, the government boosted its estimate of growth during the final three months of the year to 3.9%, more than double the 1.6% growth rate turned in from July through September. Since then, private economists have been redrafting their own predictions for 1985 based on the stronger growth recorded at the end of the year.

In the durable goods report, the transportation industry showed the largest decline, 6.7%, caused primarily because of the dip in defense orders.