Durable Goods Orders Rebound in March
Orders to U.S. factories for interest-sensitive durable goods rebounded in March from their first decline in four months, with demand for computers and electronic equipment driving the rally.
The Commerce Department reported Wednesday that orders for big-ticket items--those expected to last at least three years--climbed 0.6% last month. They had fallen 0.7% in February.
Analysts, surprised by the March recovery, said it is a sign of business confidence and solid growth despite other indications of weakness in the economy. They said there is little cause to fear an inflationary boom.
“It’s healthy growth, even better than expected,” said Robert Eggert, who heads the forecasting firm Eggert Economic Enterprises in Sedona, Ariz. “The personal computer market is hot as a pistol.”
Financial markets, worried that an upsurge in economic growth will lead to inflation and another round of interest rate increases by the Federal Reserve Board, fell after the government report, but they soon recovered.
Analysts said most signs point to a slowdown from the booming growth that closed out 1994, and they predicted moderate economic expansion this year.
On Friday, the Commerce Department will provide its first broad look at the economy for the first quarter of 1995 when it announces preliminary figures for gross domestic product.
“While interest rates have gone up, they have to be balanced against business prospects,” said economist Charles Renfro of Alphametrics in Bala Cynwyd, Pa., a forecasting firm. “If prospects are good and the rates are only up moderately, there’s no reason to cut back on investment. And, of course, the world economy is expanding.”
He predicted that GDP for the first quarter grew at a solid 3.2% annual rate, compared to a rapid 5.1% for the last three months of 1994.
The Fed has raised a key short-term interest rate seven times since February, 1994, but the most recent hike occurred nearly three months ago.
Analysts had expected orders for durable goods to decline in March because they are usually affected by rising interest rates, which make buying on credit more expensive.
The Commerce Department said the increase in orders was led by a 6.1% jump in electronics and other electrical equipment. Industrial machinery and equipment rose 2.7%, after climbing 1.4% the previous month and soaring 9.1% in January.
Orders for all durable goods totaled a seasonally adjusted $164.3 billion, up $1 billion from February. New orders for the first three months of this year were 3.4% higher than the fourth quarter of last year.
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Durable goods
New orders, seasonally adjusted, in billions of dollars:
March 1995: 164.3
Source: Commerce Department
