Auto Sector Drives Factory Orders Up

Orders to U.S. factories for manufactured goods rose 2.9% in August, the government said Tuesday, but analysts said a one-month boost from automobile orders belies the weakness in the industrial sector.

The Commerce Department reported that orders for both durable and non-durable goods totaled a seasonally adjusted $237.2 billion after declining 2% in July to $230.5 billion, the lowest level since last November. Orders rose 0.6% in June.

The August gain was driven by the transportation sector, which rose 6.9% despite a decline in the aircraft component. Orders for automobiles posted a big increase because of end-of-the-model-year sales incentives.

“But the auto sales were a temporary phenomenon,” said Bruce Steinberg, senior economist at Merrill Lynch Capital Markets in New York.

“Basically, the industrial sector has slowed down,” he said. “American consumers are spending less, exports are still strong but . . . they are falling down too. Domestic capital spending is beginning to evaporate.”

Steinberg said the factory sector would continue to be “quite sluggish” for the rest of the year and into 1990.

John Hagens, an economist at the WEFA Group in Bala-Cynwyd, Pa., also sees the industrial sector continuing to slow, “flip-flopping” from one month to the next.

The Commerce report showed orders for durable goods--”big ticket” items expected to last more than three years--rose 3.9% in August, up from the 3.8% initially reported last week. Nondurable goods orders were up 1.8%.

In addition to transportation, the non-electrical machinery durable goods component, which includes computers, registered a gain, up 9.3%.

But orders for electrical machinery fell 2.1%, mostly due to defense communications equipment.