Orders for Durable Goods Jump 5.1%; Biggest Gain in Year

Orders to U.S. factories for durable goods jumped 5.1% in November, posting the biggest increase in a year and averting the first three-month drop since mid-1986, the government reported today.

The Commerce Department said orders for durable goods--”big-ticket” items expected to last more than three years--increased to a seasonally adjusted $130.7 billion last month after dropping 0.7% in October.

Durable-goods orders also fell 1.2% in September. Orders had not fallen for three straight months since 1986.

The November gain, the largest since a 7.4% jump in December, 1988, was an exception to recent evidence that the U.S. manufacturing sector is in a severe slowdown. Many economists are forecasting a growth rate of 1% or less in the current quarter and some fear the economy’s unprecedented seven years of peacetime expansion may end.

Much of the softness has been concentrated in the auto industry, where weak sales have prompted layoffs and production cutbacks. But the softness has been spreading recently to the computer and defense-related industries.

As a result, economists and government officials have been calling for a further relaxation of the Federal Reserve’s grip on credit, which the central bank had applied early this year in efforts to cool the economy and reduce inflation.

A surprise in today’s report was an increase in the closely watched non-defense capital goods sector, which rose 8.3% last month to $39 billion, the largest gain since a 10.1% increase in December, 1988. Economists use this category as a barometer of business investment plans.

The Commerce Department reported Thursday that businesses plan to increase their plant and equipment spending only 4.9% next year.

Defense orders rose 15.6%. Excluding the volatile defense category, orders would have gained 4.2% in November after increasing 1.8% in October.

Transportation orders rose a sharp 10.5% to $36.7 billion in November after a 2.1% gain in October. The November advance came from increased demand for both aircraft and motor vehicles. Aircraft represented 40% of the gain.

Excluding the transportation category, durable-goods orders were up 3.1% last month.

Orders for non-electrical machinery, including computers and a wide variety of industrial equipment, rose 6.6% to $22.9 billion after a 4.7% decline in October.

Electrical-machinery orders jumped 7.9% to $21.7 billion, virtually all in communications equipment.