June Durable Goods Orders Increase 1.4%

Orders for “big ticket” durable goods rose 1.4% in June, the biggest increase since March, but the improvement came entirely from higher demand for military equipment, the government reported Thursday.

The Commerce Department said orders for durable goods climbed to a seasonally adjusted $108.5 billion last month, $1.5 billion above the May figure.

The 1.4% increase followed no change in May and was the biggest advance since a 4.2% rise in March. But after removing a 15.8% jump in defense orders, the civilian categories showed no growth at all last month.

The Reagan Administration still found reason for optimism, contending that manufacturing orders have been improving steadily this year because American companies were enjoying more success selling overseas.

Commerce Secretary Malcolm Baldrige said new orders have been averaging $104.4 billion a month during the first half of this year, up 5.3% from the level in the last half of 1986.

“Rising exports are brightening the picture for durable goods producers,” he said in a statement.

But many private economists said higher export sales were being offset by much weaker domestic demand and these two forces would keep manufacturing from enjoying much of a pickup.

“The June report suggests modest strength. We will continue limping along, but we are not going to have a boom,” said Bruce Steinberg, senior economist at Merrill Lynch in New York.

Orders in the closely watched category of non-defense capital goods, which reflect business investment plans, fell 3% in June after strong gains in April and May. Business investment spending was weak all last year, and many economists are concerned that it will show little strength this year because of the new tax law, which removed many business investment tax breaks.

Roger Brinner, an economist with Data Resources Inc. of Lexington, Mass., said the boom in export sales was helping to offset the negative effects of the new tax law.

“If you look at almost any major export category, you find double-digit growth rates since mid-1986,” he said. “The export strength is managing to buffer weakness from tax reform. If it wasn’t for that, U.S. manufacturing would be a sad sector.”