Construction Pace Quickens : New Factory Orders Dip in Month

New orders to the nation’s factories for manufactured goods declined in February, but construction activity increased, the government reported Monday.

The Commerce Department reported that orders to U.S. factories for manufactured goods slipped 0.2% in February, the fifth decline out of the past six months. At the same time, the department reported that spending for new construction rose a healthy 1.4% in February, spurred by increased activity on home remodeling and office and industrial projects.

The department said new factory orders declined to $193.5 billion in February, following a 0.2% increase in January.

The fall-off was attributed to a steep 43.7% plunge in demand for military hardware, which overshadowed a record 27.5% increase in orders for civilian capital goods.

Without the big drop in the military category, orders for manufactured goods would have actually risen a solid 2.1% during the month. Analysts said this figure was a more accurate reflection of the economy’s current health.

Predicts Rebound

Michael Evans, head of Evans Economics, a Washington forecasting firm, predicted that orders would rebound substantially in March.

“The economy is coming to the end of a pause in growth and will be picking up in the second quarter and more in the third quarter,” he said.

Manufacturers’ inventories rose a sharp 0.3% in February, following a 1.2% decline in January.

While it was the first increase in inventories since last October, Evans said it probably reflected a slowdown in shipments during the month rather than a concerted effort on the part of manufacturers to rebuild their inventories.

Analysts were not concerned with the big drop in defense orders, pointing out that these orders more than doubled last November and have been running at unusually high levels since that time. The drop left defense orders at $5.5 billion, compared to $9.8 billion in January.

Orders for non-defense capital goods shot up 27.5%, the biggest increase on record, to a February total of $29.5 billion, following a 13.1% January decline. This category is watched for the signals it can give about business expansion plans.

Computer Orders Jump

The big gain in this category was attributed to a 154% jump in orders for computers and other office equipment. These orders totaled $7.9 billion in February, up from $3.1 billion in January.

Robert Ortner, chief economist for the Commerce Department, said the surge in computer spending would not be duplicated in coming months, making it likely that business capital spending would drop again.

“I don’t think these orders are as robust as they appear on the surface,” he said. “We are continuing to lose business to foreign manufacturers.”

The 0.2% overall decline in orders came from a 1.2% drop in demand for durable goods, items expected to last three or more years, which offset a 0.9% pickup in orders for non-durable goods.

The 1.2% drop in durable goods orders was originally reported 12 days ago as a smaller 0.2% decline, while the 0.2% overall January increase was revised from an original estimate of a 0.9% decline.