Durable Goods Orders Fall for Second Month

Orders to U.S. factories for “big-ticket” durable goods fell 1.8% in February, but analysts said the second consecutive monthly decline had not shaken their belief that manufacturing will be a bright spot in the economy this year.

The Commerce Department report Tuesday said that orders for durable goods--items expected to last three or more years--totaled a seasonally adjusted $111.4 billion in February, following an identical 1.8% January decline.

It was the first time since the spring of 1986 that durable goods orders have fallen for two consecutive months.

The February decline surprised economists, but they maintained that manufacturing companies were still enjoying boom times because the weaker dollar has boosted export demand.

“The fundamentals continue to look positive for manufacturing,” said Allen Sinai, chief economist of Boston Co. “What we have is a two-month hesitation after some big increases.”

Manufacturing is expected to be a major source of strength this year as businesses step up production to meet rising export demand and American companies increase orders for capital equipment to expand their production capabilities.

The Reagan Administration is forecasting that almost half of all economic growth in 1988 will come from rising export demand.

Concerns Eased

Still, analysts said the back-to-back declines did show that businesses were cutting back on orders in the early part of 1988 in an effort to get control of bulging inventories. Inventories swelled at the end of 1987, while consumer demand fell.

Economists once had feared this combination could be enough to topple the country into a recession. But brighter statistics this year, including a continued decline in the unemployment rate in February, have eased those concerns.

Cynthia Latta, an economist with Data Resources Inc., noted that while new orders fell in February, the total backlog of unfilled orders rose 0.7% to $397.1 billion, the 12th consecutive monthly increase.

“This backlog suggests that factories can keep humming along for a while even though new orders dropped,” she said.

Michael Evans, head of a Washington forecasting firm, said he expected overall economic growth, as measured by the gross national product, to dip to about 1.8% in the first three months of this year, a significant revision from his earlier forecast that the economy would fall into a recession.

The government will issue today a new estimate of GNP growth in the final three months of 1987, and many economists believe that it will be revised up slightly from the robust 4.5% annual rate reported last month.

The weakness in durable goods orders in February was widespread, with only the transportation sector showing any strength. Orders for cars, trucks and aircraft climbed 3.5% to $29.3 billion after a 9% drop in January.

Orders in the volatile defense category fell 7.9% to $7.8 billion. Without this decline, total orders would have fallen a slightly smaller 1.3%.

The key category of non-defense capital goods, considered a good indicator of industry investment plans, fell 5.9% last month.