Orders for “big ticket” durable goods, bolstered by heavy demand for military hardware, shot up 6% in February, the biggest gain in five months, the government reported Tuesday.
The Commerce Department said orders for durable goods rose $5.7 billion in February to a seasonally adjusted $101.2 billion.
The advance, the best showing since a 7.6% rise last September, came after a record decline of 9.9% in January, which analysts had blamed on turmoil caused by the new tax law.
Orders shot up at the end of last year as both businesses and consumers rushed to take delivery on items in an effort to qualify for expiring tax breaks, but this advance buying held down activity during January.
Doug Handler, an economist with Wharton Econometrics, said the rebound in February showed that the economy was now settling down after the wide swings at the end of last year.
“We have survived the hit caused by the new tax law,” he said. “This is a good report and is consistent with the industrial production numbers we have been seeing.”
Baldrige Voices Optimism
Industrial output has been rising since October, with many economists contending that the string of increases is finally pointing to an upturn for America’s beleaguered manufacturing sector, which has suffered for more than two years from stiff foreign competition.
“Durable goods orders began to rise after mid-1986,” Commerce Secretary Malcolm Baldrige said in a statement. “As the trade balance improves this year and producers replenish inventories, we should see further strength in this important sector of the economy.”
The Administration, which is forecasting that the $170-billion trade deficit will drop by between $30 billion and $40 billion this year, is predicting that overall economic growth will jump to an annual rate of 3.2%, far ahead of last year’s weak 2.5% growth level.
The 6% February rise in orders for durable goods, items expected to last three or more years, was propelled by a giant 48.9% increase in orders for defense equipment, which erased a 38.8% decline in demand for military hardware in January.
Coupled with the surge in military orders was climbing demand in civilian categories, where durables rose 3.8%, compared to a 7.7% drop in January.