Durable Goods Orders Up 0.9% in November

Orders to U.S. factories for “big ticket” durable goods, spurred by a rebound in demand for military hardware, rose 0.9% in November, the Commerce Department reported Wednesday.

It was the first increase in three months, and many analysts said it could be signaling better days ahead for beleaguered U.S. manufacturers.

Orders for durable goods--items expected to last three or more years--rose 3.2% in August but fell 0.9% in September and then dropped an even steeper 2% in October.

The big declines were caused by a plunge in the defense category. But defense orders turned around in November, rising 17.2%. Without the big military increase, total orders would have actually fallen a slight 0.1%.

However, many analysts said the November report showed that demand for manufactured goods was increasing at a better clip than for most of 1985, a year when domestic producers have been battered by strong foreign competition.

The report noted that, while orders for non-defense capital goods fell 1.4% in November, the decline stemmed from a big drop in demand for civilian aircraft. If this volatile category were removed, business capital orders would have risen a strong 10.2%.

The civilian capital goods category is watched closely for clues of industry expansion and modernization plans, and analysts said the November performance reflected a turnaround in business sentiment since a survey earlier this fall found businesses expecting to cut investment spending by 1% next year.

“Because of the recent sharp decline in interest rates and the big boom in the stock market, businessmen have become more optimistic and they have started to place new orders for capital goods,” said Michael Evans, head of Evans Economics.

John Albertine, president of the American Business Conference, a coalition of high-growth companies, said he believed that capital spending would be “surprisingly robust” next year.

“As the effects of the dropping dollar and falling interest rates are felt in the marketplace, I think we will see a sizable increase in new orders for domestically produced capital goods,” he said.

For the first 11 months of 1985, orders for durable goods have risen a sluggish 3.6%, reflecting the inroads made by foreign manufacturers who have been aided by the strong dollar, which makes their goods cheaper.

Robert Ortner, chief economist for the Commerce Department, said that, while manufacturing orders were generally weak in the early part of the year, many segments are starting to post improvements.

“The trend doesn’t look like things are booming, but the November report is generally encouraging. There were widespread gains that more than compensate for some recent weakness,” he said.

New orders totaled $105.4 billion last month, up $900 million from the October level.

The 17.2% rise in defense did not completely erase steep declines of 21.1% in September and 23.8% in October.

Within the major industries, machinery orders rose 7.5% to $35 billion with widespread increases in both the electrical and non-electrical categories.