‘Big Ticket’ Orders Take Surprise Drop

The government reported Wednesday that orders to U.S. factories for durable goods fell in June, catching many economists by surprise and raising questions about whether the nation’s recovery could be sustained.

The drop in orders for “big ticket” items designed to last at least three years was the first in three months. The Commerce Department revised downward the previously reported increase for May. Analysts said the 1.6% drop was the latest sign of a choppy, slow-moving recovery.

“The June durable goods report will probably reignite talk of a double-dip recession,” said economist Marilyn Schaja of Donaldson, Lufkin & Jenrette, a New York securities firm. “The data, however, only reinforces our impression of the recovery being mild from a historical perspective.”

Ed Yardeni, an economist with C. J. Lawrence Inc., a New York investment firm, said the report “supports our view that the recovery will be uneven.”

And at the White House, spokesman Marlin Fitzwater described the drop as a “blip” that did not alter the Administration’s contention that a recovery is under way.

The Commerce Department said orders for durable goods--usually expensive products expected to last more than three years--totaled a seasonally adjusted $116.5 billion, down from $118.4 billion in May.

The drop followed gains of 3.6% in April and 2% in May, which was revised down from 3.4% in an earlier estimate.

Durable goods orders are a key economic barometer of manufacturing industry plans. A prolonged decrease could result in declining production and a loss of jobs.

Non-defense capital goods orders excluding aircraft, often a barometer of business plans to expand and modernize, fell 5% in June.

The overall decline in orders in June resulted in part from a 15.6% plunge in defense orders after gains of 22.5% in May and 16.4% in April. Excluding this volatile sector, durable goods orders fell only 0.4%.

Transportation advanced 3.7%, due in large part to aircraft. That followed a 4.8% increase a month earlier.

Excluding this sector, orders fell 3.3%.

But orders for electronic and other electrical equipment plummeted 10.1% after falling 2.4% in May. Orders for industrial machinery and equipment slipped 4.7%, wiping out a 3.4% gain a month earlier.

Durable Goods New orders in billions of dollars, seasonally adjusted June, ‘91: 116.5 May, ‘91: 118.4 June, ‘90: 127.1 Source: Commerce Department