Durable Goods Orders Drop 2.8%

Associated Press

Orders to U.S. factories for "big ticket" durable goods fell 2.8% in January, the biggest decline in a year, reflecting sharp drops in demand for aircraft and primary metals, the government reported Tuesday.

The Commerce Department said orders for durable goods fell to a seasonally adjusted $112.23 billion last month, a drop of $3.28 billion from December.

The steep decline, only the third setback in the past 13 months, followed a big December advance of 4.1%, the strongest rise since March.

Analysts said the January setback reflected a return to more normal levels of demand in both aircraft and primary metals, two categories that had seen unusually big advances in December.

Slower Growth Predicted

Both the Reagan Administration and Federal Reserve Chairman Alan S. Greenspan noted that the overall decline also masked pockets of strength, particularly in non-defense capital goods.

"The numbers that were released on durable goods, if one subtracts some of the temporary fluctuations, were really quite strong," Greenspan said during an appearance before the House Banking Committee.

Many economists are predicting that growth will slow in the first half of 1988 because of an unusually high buildup of unsold inventories that occurred at the end of 1987. But Greenspan said he does not think this slowdown will deteriorate into a recession, in part because of the strength being shown in manufacturing.

"While we envisage sluggish growth for the period immediately ahead, there just are very few signs that we're about to tilt over" into a recession, Greenspan said.

At the White House, presidential spokesman Marlin Fitzwater said the Administration continues to believe that the trend in manufacturing "is still healthy."

The Administration is forecasting that half of overall growth this year will come from rising factory production.

Private economists said they were not alarmed by the January setback, which was the biggest drop since an 8% fall in January, 1987. They pointed to a 1.6% increase in orders for non-defense capital goods, the category that reflects business plans to expand production facilities.

"That is an encouraging sign that businessmen are not backing off from their investment plans," said David Wyss, an economist with Data Resources Inc. of Lexington, Mass.

A Busy December

Even with the setback last month, new orders were still 15.5% ahead of a year ago, reflecting the strong export demand caused by the decline in the value of the dollar.

Demand in transportation industries fell by 12.4% to $27.21 billion last month following an 8.6% advance in December, a surge attributed primarily to new aircraft orders placed with the Boeing Co. of Seattle.

Orders for primary metals fell 15.5% to $10.19 billion after shooting up 10.5% in December. Analysts said the big December jump in orders came because of fears of pending price increases.

Demand for military hardware fell 12.1% in January to $7.86 billion.

Orders for electrical machinery rose 5.5% in January and demand for non-electrical machinery rose 5.8%.

Shipments of durable goods fell 3.3% to $109.26 billion following a 4.3% increase in December.

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