Durable Goods Orders Prove Not So Durable : Economy: A 3.7% decline in March is much larger than expected. And it’s the latest in a string of events that suggest the recovery has stumbled.
Orders for durable goods such as cars and major appliances fell 3.7% in March, the Commerce Department reported Friday--the biggest drop since December, 1991, and a much larger decline than had been anticipated.
Analysts said that the decrease is the latest in a series of developments that suggest the economic recovery has stumbled.
“It looks like everything has stalled out,” said Donald Ratajczak, an economics professor at Georgia State University. “What’s happened is that the economy is hibernating a bit and we are waiting for something to get us excited again. It will happen, but it will take some time.”
The decline in orders last month to a seasonally adjusted $130 billion followed increases of 2.2% in February, 2.3% in January and a huge jump of 9.7% in December. Even when the severe blizzard that paralyzed the East Coast for several days in March was taken into account, most analysts had predicted a decline in orders of only 1% or less for the month. The last comparable decrease was 5.3% in December, 1991.
Economists pointed to several other recently released indicators that suggest the recovery, while not over, has become sluggish. They include a decline in retail sales, a slowdown in new housing starts and a stagnant non-residential construction industry.
Also of some concern for economists is a decline in consumer confidence. The University of Michigan index of consumer expectations has slipped and only one-third of people questioned in a recent Wall Street Journal/NBC News poll thought the economy would improve this year.
“What we’re going to see for this quarter and for at least the first half of the second quarter is ‘subsatisfactory’ growth,” said Robert Dederick, chief economist for Chicago-based Northern Trust Co.
Most analysts are now predicting that the annual rate of economic growth--to be announced Thursday--will be between 2% and 2.5% for the first quarter, down from 4.7% in the fourth quarter last year.
“The fourth-quarter consumer spending was simply not sustainable because consumers did not have more discretionary income but instead were spending from their savings, as evidenced by the lower savings rate,” said Gordon Richards, an economist with the National Assn. of Manufacturers. “As a result, consumption is likely to be weak in the first half of the year.”
In Tokyo on a trade mission, Commerce Secretary Ronald H. Brown renewed his call for some kind of economic stimulus plan. President Clinton was forced to abandon his $16-billion jobs bill earlier this week after a filibuster by Senate Republicans.
“The failure of the Senate to pass the President’s stimulus package does not change the pressing need for an economic program that stimulates growth and employment, bolsters sagging confidence and provides new incentives for investment,” Brown said in a statement.
The Commerce Department also reported Friday that the backlog of unfilled orders for factories decreased 1.1%, indicating that job growth may not increase very rapidly, analysts said.
Companies often hire additional workers to keep up with their backlog of unfilled orders, and analysts had hoped that the backlog, which had been increasing since November, would spur employment.
“Job growth certainly hasn’t been outstanding,” said Dan Laufenberg, chief economist for IDS Financial Services in Minneapolis. “It hasn’t been anywhere near what you might expect at this stage of a recovery-expansion.”
Durable Goods
New orders in billions of dollars, seasonally adjusted.
March, ‘93: 130.0
Feb, ‘93: 135.1
March, ‘92: 120.2
Source: Commerce Department
