Durable Goods Orders Up 3rd Straight Month

Orders for durable goods rose in April for the third consecutive month, adding to an already large backlog, the government said Tuesday in another report indicating strong demand for U.S. exports and no sign of a slowdown in U.S. economic expansion.

New orders for durable goods--expensive items designed to last a least three years, such as appliances, cars and business equipment--rose a seasonally adjusted 0.8% last month to a record $116.28 billion, the Commerce Department reported. In March, orders rose 0.9%.

“It’s a moderate increase. It clearly shows that export orders are very strong,” said Lawrence Chimerine, chairman of WEFA Group, a Philadelphia-area forecasting firm.

Excluding defense orders, which tend to fluctuate widely from month to month, the April increase was also 0.8%, indicating that gains were evenly split between military and civilian bookings.

The overall rise in durable goods orders last month, which was slightly higher than expected, was due mostly to a 4.4% increase in electrical machinery, which included a big rise in defense communications equipment, the department said.

Chimerine and David Jones, an economist with Aubrey G. Lanston & Co., a government securities dealer in New York, said the cheaper dollar also is helping U.S. manufacturers in another way by boosting the cost of imported goods in the United States.

Inflationary Pressure

“There are some hints that consumers are beginning to turn away from higher priced imports in favor of domestic goods,” Jones said.

With the signs of economic strength, comes concern that production in industries is approaching capacity limits, a development that could fuel price increases.

“The fear would be that this continuing strength . . . could be a source of renewed inflationary pressure,” Jones said.

However, Chimerine said: “I think the fears of an inflationary boom have been exaggerated right from the start. . . . Even with an upturn in exports, we’re not in the midst of an economic boom.”

Economists were especially encouraged by a rebound last month in orders for non-defense capital equipment, which reflect investment by business in new plant and equipment.

After two months of declines, orders for non-defense capital goods rose 1.4% in April to $32.90 billion.

“The strong increase in non-defense capital goods orders is a good sign because it says investment is continuing into the second quarter,” said Cynthia Latta, senior financial economist at Data Resources in Lexington, Mass.