Durable Goods Orders Rise
Orders to U.S. factories for big-ticket manufactured goods, which suffered the biggest drop in six years in December, rebounded a bit last month, led by strong demand for telecommunications equipment.
The Commerce Department reported Thursday that orders for durable goods, items expected to last three or more years, increased 0.7% last month to $185.3 billion.
The gain was just half what had been expected following a steep 5.5% plunge in December and underscored, economists said, that manufacturing activity was starting to slow even before the full effects of the Asian crisis are felt. A backlog of unsold inventories will dampen orders further in coming months, they predicted.
“Manufacturing is slowing after running ahead at an unsustainable pace,” said Robert Dederick, an economist at Northern Trust Co. in Chicago.
In a second report Thursday, the Labor Department said new claims for unemployment benefits rose a bigger-than-expected 10,000 last week to 320,000, the highest level since mid-January. The increase pushed the four-week moving average for claims up by 5,000 to 309,250.
Private economists believe that the steep plunge in currency values in many Asian countries and the resulting economic slowdowns will cut heavily into U.S. exports while increasing the level of Asian imports coming into the United States.
The impact of a sharp rise in the trade deficit is expected to shave as much as full percentage point off economic growth this year. The U.S. economy in 1997 expanded by 3.8%. It was the best showing in nine years and helped to push the unemployment rate down to levels not seen in nearly three decades.
For January, the government reported that the 0.7% increase in durable goods orders was led by a 3.4% surge in demand for electronic goods, primarily telecommunications products.
The transportation sector, which includes aircraft, rebounded in January, rising 2.1% after a 23.1% drop in December. The January advance reflected a large increase in aircraft and parts, which offset weakness in autos.
Orders for industrial machinery rose 1.2% in January, but orders for primary metals fell 1.9%.
Demand for military equipment dipped 9.8% last month, while orders for non-defense capital goods were up 10.9%. But this jump followed a 22% drop in capital goods orders in December.
Cheryl Katz, economist at Merrill Lynch in New York, said shipments of capital goods excluding aircraft fell by 1% last month, and she predicted further weakness in coming months.
Demand for durable goods excluding defense were up 1.1% last month, the eighth increase in the last 10 months.
Shipments of durable goods, however, have been showing weakness in recent months. Shipments dropped another 1.4% in January, the third decline in the last four months.
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Durable Goods
New orders, in billions of dollars, seasonally adjusted:
Jan.: $185.3
Source: Commerce Department
