Encouraging Signs

The Commerce Department said durable goods orders rose 1.6% in March to $122.6 billion, a slightly larger gain than anticipated by analysts. In addition, applications for unemployment benefits fell to 404,000 for the week ending April 11, down from 416,000 a week earlier and the lowest since early October.

* Key Factors: Much of the strength in durable goods (items expected to last three years or longer) in March was concentrated in a 6.3% surge in orders for transportation equipment, particularly aircraft. But most other categories also posted increases. Orders for items other than transportation equipment edged up 0.1%, only the second advance in eight months. In March, orders for military goods rose 7.8%. Orders for industrial equipment and machinery were up 1.1%. Orders for electrical equipment rose 1.5%. Orders for primary metals, such as steel, fell 5.6%, only partially offsetting a strong gain in February.

* Good signs: The March durable goods data suggests that activity in the manufacturing sector has begun to pick up. For unemployment claims, the latest drop was unexpected and marked a clear departure from the first three months of this year, when new claims averaged just under 450,000 a week.

* Bad signs: Despite recent gains, durable goods orders still have not regained the ground lost by a 5% drop in December. Economists cautioned that growth so far has been strong enough only to stem layoffs, not to put the unemployed back to work. The backlog of unfilled orders slipped 0.6% to $480.6 billion, the seventh drop in a row. The backlog is a measure of whether the current work force and production facilities can keep up with demand. A decline means there is less pressure on factories for rehiring. In addition, the unemployment rate in March, as reported previously, remained at a 6 1/2-year high of 7.3%. Economists are not expecting substantial improvement until the second half of the year, and then no more than half a percentage point.

Durable Goods Orders

New orders, billions of dollars, seasonally adjusted

March, ‘92: 122.6

Feb., ‘92: 120.6

March, ‘91: 112.1