4.9% Surge in Factory Orders Biggest in a Year : Economy: Surprising durable goods report for August reinforces evidence of recovery.
Factory orders for expensive, long-lasting goods rose more rapidly in August than they had in a year, rekindling talk of a resurgent economy.
The Commerce Department said Wednesday that durable goods orders shot up 4.9% last month after two straight declines. The increase was the largest since orders soared 6.5% in August, 1994.
Analysts said the surprisingly large advance--combined with an improving housing market and steady consumer confidence--is encouraging. But they said the pace of growth is not becoming rapid.
“You’re bouncing back after some pronounced weakness,” said economist Stuart Hoffman of PNC Bank Corp. “I would not call that a boom.”
Stocks and bonds fell sharply in early trading but recovered nearly all their losses. The Dow Jones industrial average closed down 3.25 points, and the yield on the key 30-year Treasury bond was unchanged at 6.57%.
Analysts said the durable goods report reinforces evidence of improving growth that prompted the Federal Reserve Board on Tuesday to forgo cutting interest rates. Many analysts said rates could remain stable for the balance of the year if the economy continues to strengthen.
But Michael Evans, owner of a forecasting firm in Boca Raton, Fla., predicted that the economy will tail off by the end of the year. “Manufacturing firms report that [inventories] are still too high and further cutbacks are expected in the fourth quarter,” he said.
Volatile orders for autos accounted for about half the surge in durable goods orders last month as assembly lines started up after a summer shutdown to retool for the new models.
Orders were also up strongly for industrial equipment, primary metals and military goods. Electronic equipment was the only major category that fell.
The Commerce Department said orders for durable goods totaled a seasonally adjusted $163.9 billion, up from $156.2 billion in July. For the year so far, new orders are 8.1% higher than for the same period in 1994.
Orders fell 1.8% in July and slipped 0.3% in June. The economy slowed dramatically in the spring, growing at a 1.1% annual rate. But analysts believe it is now expanding at about a 3% annual rate as consumer spending picks up.
There was other evidence that factories are gaining momentum. The National Assn. of Manufacturers said half the chief executives it surveyed expect their companies to increase jobs and only 13% expect fewer employees. Seven months ago, the figures were 40% and 21%, respectively.
