Durable-Goods Orders Climb 0.4% in January

Orders to U.S. factories for durable goods rose a slight 0.4% last month as a surge in demand for military hardware was not enough to offset weakness in most other areas, the government reported Tuesday.

The Commerce Department said orders for durable goods--substantial items expected to last three or more years such as appliances and furniture--totaled $108.2 billion last month. The January gain was sharply lower than December’s huge 3.9% increase.

All of the strength last month came from a huge 45.1% jump in defense orders, the biggest rise in this category in 12 months.

For all of 1985, the department said, orders for durable goods rose just 3.7%, down substantially from the 14.6% increase in 1984.

Without the big defense increase, orders actually would have fallen by a steep 2.8%. That would have been the weakest performance by the civilian durable goods sector since a 4.6% decline in non-defense orders last March.

Many analysts said that this weakness was disturbing and that it underscored the fact that America’s severe foreign trade deficit problems have not yet been corrected.

Lawrence Chimerine, president of Chase Econometrics, a forecasting firm in Bala Cynwyd, Pa., said the report confirmed his belief that, while the economy is gaining strength, the rebound will be a modest one from the weak growth of 2.3% last year.

“We still think growth will be limited to about 3% for the year, even taking into account the decline in oil prices,” he said. “Some of the forecasts for 4% and more are incredibly exaggerated.”

Joseph Carson, economist at the New York investment firm of Merrill Lynch, said that orders looked even weaker if a big gain in the volatile category of commercial aircraft was removed from the December report.

“Domestic companies have yet to see any improvement in their business from the declining dollar,” he said. “The improvement, when it does come, is likely to be more gradual and smaller than many people expect.”

Transportation Equipment

The big 3.9% increase in total orders in December stemmed from a huge 28.3% jump in orders for transportation equipment, reflecting a big order for commercial aircraft, which was placed by the Japanese.

The 45.1% increase in defense orders in January put orders in this category at $10.4 billion, following three months of relatively low orders averaging $6.7 billion a month.

Orders in the key category of non-defense capital goods fell 19.7% last month, erasing an 18.6% gain the month before, which had reflected the aircraft surge. This category provides signals about future industry plans to expand and modernize production facilities.

By category, orders for transportation equipment rose 0.9% last month, with a large increase in demand for motor vehicles partially offsetting the drop in aircraft orders.

Orders for primary metals such as steel rose 5.3% while machinery orders declined 2.2%, the fifth decline in the last seven months.