Factory Orders Remain Strong in March

Orders to the nation’s factories for “big ticket” items remained strong in March, the government said Friday, bolstering analysts’ views that the economy is growing at a healthy pace.

The Commerce Department said orders for durable goods, items expected to last three or more years, were virtually unchanged, rising less than 0.1% to $114.3 billion in March as a drop in military hardware more than offset gains elsewhere.

That was far less than the 1.3% advance most economists were expecting. However, the government raised its estimate of new orders in February. The revised report shows a 0.1% gain for the month, rather than the previously reported 1.1% drop.

The net result is a relatively strong level of orders through the first quarter of this year, 7.9% above a year ago when compared March to March.

“I would describe it as a . . . picture that shows modest growth in the economy, not a boom but no signs of a big dip,” said Jerry Jasinowski, chief economist of the National Assn. of Manufacturers.

Roger Brinner, an economist with Data Resources Inc., a Lexington, Mass., forecasting firm, said it is “very premature” to worry about sluggish growth in new orders because shipments remain strong and the backlog in unfilled orders remains high.

Backlog Increases

Shipments of durable goods rose 2.6% last month to $113.3 billion after a 1.4% rise in February. The backlog of unfilled orders was up 0.2% to $399.9 billion in March, following a 1% rise the month before.

“A tremendous backlog has built up, so shipments will remain high no matter how many new orders come in,” Brinner said. “If orders held flat for the rest of the year, you would still get a very strong level of shipments compared to last year.”

In March, a 3% drop in the volatile defense goods category, to $8.3 billion, offset a 0.3% increase in orders for non-defense goods, which rose to $106.0 billion.

Orders for primary metals such as steel jumped 4.2% in March after rising 0.9% in February. At $10.8 billion, they stood 19.4% ahead of last year.

There was also strength in transportation, primarily motor vehicles and aircraft. This sector rose 2.5% to $31.3 billion, after a strong 5.5% boost in February.

Orders for electrical machinery plummeted 4.7% to $18.6 billion, while non-electrical machinery edged down 0.2% to $19.7 billion. However, orders in both categories remained 13% above a year ago.

Fear High Demand

“Smokestack U.S.A. is back. We’ve got strong growth in the basic areas like steel. That’s really pacing the economy now. The problem is that growth might be too strong,” said David Jones, an economist with Aubrey G. Langston & Co., a government securities dealer in New York.

After the October stock market crash, analysts worried about a slowdown in the economy during the first three months of this year. However, they now are more concerned that too much demand could increase inflation.

Strong demand overseas for U.S. goods, spurred by the devalued dollar, and a subsequent need by American manufacturers for machinery are expected to keep the economy growing.

The key category of non-defense capital goods, which economists consider a good indicator of factory expansion plans, was $33.3 billion in March, 20.1% higher than a year earlier.

However, the most recent monthly numbers show a dip in orders--a 1.3% decline in March and a 3% drop in February.