December Factory Production Rises 1.9%

Orders to U.S. factories for manufactured goods rose 1.9% in December and closed out the year 6.4% higher, the government reported today.

The Commerce Department said orders for both durable and non-durable manufactured goods totaled a seasonally adjusted $244.2 billion in the final month of 1989 after rising 2.4% in November.

The increase put orders for the year at $2.83 trillion after a 9.7% increase in 1988, the largest since 1983.

Durable goods were up 5.9% for the year, following gains of 11% in 1988 and 7.6% in 1987.

For much of the year, Federal Reserve interest rate policies held back orders for durable goods--big-ticket items expected to last more than three years--because many of those goods are financed through loans.

But durable goods orders started to perk up late this fall and jumped 4.8% in November and 3.2% in December.

After the December report, analysts said it appeared that the manufacturing sector of the economy was stabilizing.

But the manufacturing sluggishness through much of 1989 was reflected in the report’s figures for the entire year: Although durable goods orders were up 5.9% to $1.52 trillion, they advanced at their slowest pace since a 0.4% gain in 1986.

In addition to new orders, the Commerce Department said that shipments of manufactured goods fell 0.5% in December to $231.8 billion and that inventories dropped 0.4% to $371.5 billion.

If inventories increase without a corresponding gain in new orders, it could signal production cutbacks in the future as factories attempt to get rid of goods on shelves and back lots.

Orders for durable goods rose 3.2% in December to $134.4 billion, paced by transportation equipment, which was up 11.2% to $40.9 billion.

Large increases in aircraft, shipbuilding and tanks more than offset a decline in motor vehicles, the department said. Without the transportation category, orders would have edged up 0.2%.

In the key category of non-defense capital goods, a barometer of business investment plants, orders rose 18% in December to $45.9 billion.