Factory Orders Slip for 2nd Straight Month

Spillover from the Asian economic crunch and the just-settled General Motors strike pushed down new orders to factories for big-ticket goods in June for a second consecutive month, according to government figures released Wednesday.

The 0.2% decrease, coming on top of a steep 3.3% slide in May, reduced orders for durable goods--items expected to last three or more years--to a seasonally adjusted $182.3 billion last month, the Commerce Department said.

“The trend has turned from an accelerating boom in 1997 into a much tougher climate here in 1998,” said economist David Orr of First Union Corp. in Charlotte, N.C.

It was the first back-to-back decline in the crucial sector in 1 1/2 years, but some economists saw a partial rebound in orders for some high-tech goods as a sign of hope.

Excluding aircraft, orders rose 3.4% for capital goods, or machinery and equipment that businesses use.

“Overall, manufacturing is still the weak link in the U.S. economy,” said economist Lynn Reaser of NationsBank Corp. of Jacksonville, Fla. “But the ending of the GM strike will help the sector to improve . . . and if Asia starts to bottom out . . . the manufacturing sector could start to improve.”

U.S. manufacturers have seen their Asian sales plummet and have been forced to compete at home against Asian goods produced more cheaply because of steep declines in currencies such as the yen and South Korean won.

And manufacturing’s weakness finally is showing up in numbers measuring U.S. economic strength in the aggregate. Growth in the gross domestic product in the April-June quarter is expected to be flat or perhaps negative when it is reported Friday. That’s after the economy was reported to have grown at a 5.4% pace in the January-March quarter.

June’s decline in orders was focused in automobiles, aircraft and primary metals. Transportation orders fell 6.9%, the fourth decline in five months, and primary metals declined 2.5%, the third drop in four months.

However, orders for electronic and electric equipment rose 1.9%, partially recovering from a sharp 9% drop in May. Orders for industrial machinery rose 1.7% in June after a similar drop in May.

Shipments of durable goods, a measure of current production, were unchanged in June. The backlog of unfilled orders fell 0.7%. It has decreased in four of the last five months.

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Durable goods

New orders, in billions of dollars, seasonally adjusted:

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June: $182.3 billion

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Source: Commerce Department