Durable Goods Orders Rise in New Sign of Rebound
Orders to U.S. factories for big-ticket durable goods increased in September for the third time in four months, the latest sign of a modest rebound in manufacturing.
Noting broadly based gains in machinery and primary metals, economist Stephen S. Roach of Morgan Stanley & Co. said the only weakness was in aircraft, long-lead items with little impact on the current economy.
“It means the manufacturing sector is coming out of the slump that was evident in the spring and will provide more momentum for the economy as we move through the second half of this year,” Roach said.
Commerce Secretary Ronald H. Brown called the report “another sign of continued economic growth.”
The 0.7% gain in September boosted orders for durable goods--items expected to last more than three years--to a seasonally adjusted $132.8 billion, the Commerce Department said Wednesday.
The report also shows that more orders were written in August than were originally estimated. Orders then increased 2.6%, rather than the 2.0% in the initial report.
After a burst of activity late last year, the manufacturing sector fell into the doldrums. Orders declined in March, April, May and July, although they jumped 4.3% in June.
But there have been hints recently that manufacturing was on the rebound. Industrial production, for instance, rose for four straight months through September. Analysts also note that lean inventories will have to be replenished to meet consumer demand.
However, Roach said the rebound will be gradual, and he cautioned against expecting “a powerful upsurge.”
Orders for electronic and other electrical equipment jumped 3.0%, tickets for industrial machinery and equipment were up 2.5% and orders for primary metals advanced 2.4%.
Only transportation orders fell, by 1.8%, which the Commerce Department attributed to a decline in aircraft orders that more than offset a large increase in automobiles. Stripped of the aircraft component, orders rose 2.7%, Brown said.
Also advancing were non-defense capital goods excluding aircraft, a gauge of industry plans to expand and modernize. They were up 3.4%, the seventh increase in the last eight months.
The often-volatile defense orders, on the other hand, fell 3.7% following an 8.8% drop a month earlier.
The backlog of unfilled orders continued to fall, down 1.0% to $428.8 billion, the lowest level since June, 1988, and the seventh straight drop. That seemed to indicate that current production facilities and manpower are able to keep up with demand.
Roach suggested the shrinking backlog also was due to shipments outpacing the growth in orders.
Durable Goods Orders
New orders in billions of dollars, seasonally adjusted: Sept.,’93: 132.8 Source: Commerce Department
