Aircraft Slump Drags Down Factory Orders
Plunging aircraft purchases dragged factory orders for durable goods down 1.7% in January, the government said Wednesday, but excluding the volatile transportation sector, orders rose for the third month in a row.
“If you look at the underlying trend . . . it shows a pretty solid upward trend in demand,” said economist Sung Won Sohn of Norwest Corp. in Minneapolis. “In fact, manufacturing is doing quite nicely.”
“The industrial sector is ramping up,” agreed Stephen S. Roach, an economist with Morgan Stanley & Co. in New York. “It points to sustained momentum in early 1993.”
Testifying before Congress, Federal Reserve Chairman Alan Greenspan concurred that the economy’s current prospects are “reasonably good,” but cautioned that the recovery still isn’t accelerating strongly.
“The basic momentum of the recovery is not yet secured,” Greenspan told the House Budget Committee. He said that would not occur until the economy had weathered more of the impact from cuts in defense spending and reduced more of the debt burden on businesses and consumers.
Greenspan forecast that economic activity in early 1993 will be slower than in the last half of 1992.
The Commerce Department said orders for durable goods--items such as trucks and turbines expected to last more than three years--totaled a seasonally adjusted $132.8 billion, down from $135.1 billion in December.
The drop was the biggest since a 2.7% decline in July.
But the department also said the December advance was 9.6%, even larger than the 8.7% in its original estimate.
It was the biggest jump since a 12.1% advance in July, 1991, and, analysts said, could not be sustained.
Orders, a key barometer of manufacturing activity, had fallen 1.6% in November after jumping 4.6% a month earlier.
The December advance was propelled by a 24.6% surge in transportation orders, including a big increase in aircraft. The January decline was driven by an 8.2% drop in transportation, primarily in aircraft.
Excluding the transportation sector, orders were up 0.7% in January, 5% in December and 1.5% in November.
Analysts also noted a 0.4% increase in unfilled orders, the third gain in four months, meaning that factories are having a harder time meeting demand using current capacity and manpower.
“It suggests that we could be getting increases in employment,” said Evelina Tainer of Prime Economic Consulting in Chicago.
In fact, orders for non-defense capital goods excluding aircraft were up 0.2%, the third straight advance.
