Indicators Show 1998 Going Out With a Bang

Orders for U.S.-made durable products rose more than expected in November, and consumer confidence stayed at a high level this month, suggesting the economy will enter the new year on a strong note.

The Commerce Department said orders for goods such as autos, machine tools and computers rose 1% in November, the fifth increase in six months. Analysts had forecast only a 0.1% increase.

The University of Michigan’s final index of consumer sentiment for December fell to 100.5 from 102.7 a month earlier. Still, it stayed above the year’s low of 97.4 in October, suggesting Christmas sales may be strong.

“The old year is going out with a bang,” said Bruce Steinberg, chief economist at Merrill Lynch & Co. in New York. “Because of the momentum coming out of 1998, the first quarter could be the strongest of next year.”

Separately, revised figures from the Commerce Department show the U.S. economy grew at a 3.7% annual rate during the third quarter, less than the 3.9% pace previously estimated. That’s still more than double the 1.8% rate in the second quarter.

A $2.1-billion reduction in third-quarter exports and a $3-billion rise in imports were the main reasons for the lower gross domestic product estimate. After-tax corporate profits dropped 1% in the third quarter, after rising 0.6% in the second quarter, and on a year-to-year basis after-tax profits fell 5.4%.

The University of Michigan report did suggest some uncertainty ahead about consumer behavior. Americans’ outlook on current economic conditions fell to 113.9 from 115.9 last month. Expectations concerning future economic growth are also lower this month than they were in November, the survey found. The university’s final index of expectations fell to 91.9 from 94.3 last month.

The durables report suggests U.S. manufacturers may increase production in the first quarter of next year. There was strength across the board as orders, excluding airplanes and autos, rose 1.2% in November, after a 1.7% decrease in October.

Orders for non-defense capital goods excluding aircraft, a barometer of spending by businesses on new equipment used to manufacture goods, rose 3.2% last month. In October, those orders fell 9.6%.

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Durable Goods

New orders, in billions of dollars, seasonally adjusted:

November: $190.7 billion

Gross Domestic Product

Percentage change from previous quarter, annualized real rate:

3rd quarter (revised): +3.7%

Source: Commerce Department