Durable Goods Orders Up 2.9% During April
Factory orders for durable goods rose by an unexpectedly strong 2.9% in April. The increase was the biggest since December and reflected broad-based gains in the manufacturing sector, the Commerce Department said Tuesday.
The April figure, after a revised 1% rise in March, boosted the value of ordered goods expected to last three years or longer--products ranging from jackknives to jumbo jets--to a seasonally adjusted $129.09 billion, the department said.
Excluding orders received by military contractors, which tend to be erratic from month to month, factory orders were up 4.7% in April after three months of decline. Military orders, which rose 28.5% in March and 19.7% in February, fell 16.3% in April.
The declines in durable goods orders earlier this year had raised concern that the credit squeeze being engineered by the Federal Reserve Board might be toppling the economy into recession.
A ‘Soft Landing’
Analysts took the gains of the last two months, however, as a good indication that demand in the manufacturing sector will be sufficient to keep the economy expanding this year, although not as rapidly as in 1988.
David Wyss, an analyst with Data Resources Inc., said while he still sees the rate of growth slowing, the bigger than expected increase in orders in April shows that the economy is “not softening quite as fast as a lot of people thought.”
Priscilla Trumble, an economist with WEFA Group of Bala-Cynwyd, Pa., said she believes that the Fed is successfully engineering a “soft landing,” slowing economic growth enough to dampen inflation but not enough to cause a slump.
The April durable goods report, she said, “does, in fact, make me feel a little more comfortable that . . . the bottom is not going to fall out this year.”
Robert Dederick, chief economist at Northern Trust Co. in Chicago, said the report shows that “the manufacturing sector is in no way showing a systemic weakness.”
The Commerce Department said the April increase, the largest since a 7.4% rise in December, was reflected in all major industrial categories.
Manufacturing sectors sharing in the overall increase in April included: electrical machinery, led by communications equipment, up 9.4% to $20 billion; primary metals, such as steel, up 5.6% to $12.5 billion, and non-electrical machinery, up 1.4% to $22.6 billion.
Higher demand in automobiles and auto parts boosted orders in the transportation category 0.6% to $37.3 billion in April. Demand for aircraft and aircraft parts remained strong.
