Durable-Goods Orders Plunge 2.5%
Orders to factories for big-ticket durable goods took their biggest tumble in 10 months in February, the Commerce Department reported Wednesday, pulled down by falling demand in the volatile aircraft and military sectors.
“Excluding those two sectors, we actually saw an increase in the month and a steady rise in orders over the past six months,” said Mark Zandi, an economist with Regional Financial Associates in West Chester, Pa.
“That indicates that although manufacturing is weak, it will see some improvement as we go through the year,” he added.
Evelina Tainer, an economist with Indosuez Carr Futures Inc. in Chicago, agreed, saying the report “suggests that manufacturing should be coming back this spring” from the weakness experienced during much of 1995.
Orders are considered a key gauge of the nation’s manufacturing sector, and an increase could lead to greater production and more jobs.
The Commerce Department released the durable-goods report shortly before Federal Reserve Board Chairman Alan Greenspan told Congress the economy appears on a sounder footing than just a month ago.
Appearing before the House Budget Committee, Greenspan attributed much of the recent sluggishness to high inventory levels. But he said the stockpiles have been shaved, which should lead to renewed production.
He also said prospects remain good for continued low inflation.
In its report, the Commerce Department said durable-goods orders fell 2.5% to a seasonally adjusted $165 billion. It was the steepest decline since a 4.6% drop in April.
Transportation orders plunged 11.6%, the largest drop since they declined 11.8% in October. They had slipped 3% in January after spiking up 12.3% a month earlier.
The report attributed the loss mainly to aircraft, saying demand for autos posted a small increase. But excluding transportation, orders rose 0.7%, the sixth advance in the last seven months.
Although orders for electronic and other electrical equipment fell 1.1%, tickets for industrial machinery and equipment increased 2.8%, the third increase in the last four months. Primary metals orders rebounded 0.5%, the first advance since October.
Analysts also noted a 3.7% jump in orders for nonmilitary capital goods excluding aircraft, which often are a barometer of business plans to expand and modernize. They had risen 1% in January.
Orders for military goods fell 26.5% after increasing 5.8% and 36.7% in January and December, respectively. Excluding this component, orders were down 1.3%, the largest since a 1.6% decrease in July.
Shipments, a measure of current production, advanced 1.3% in February, the third increase in the last four months.
Despite the gain, the backlog of unfilled orders edged up 0.2%. A growing backlog indicates businesses may be pressed to keep up with demand, resulting in more jobs and longer production lines.
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Durable Goods
New orders, in billions of dollars, seasonally adjusted:
Feb. 1996: $165.0
Source: Commerce Department
