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Durable-Goods Orders Up 4.2% in December

January 25, 1986|Associated Press

WASHINGTON — Orders for big-ticket durable goods climbed a sharp 4.2% in December, the government reported Friday, but analysts said the increase did not signal a revival for America's hard-pressed manufacturing sector.

Economists dismissed the gain, the biggest in more than a year, because it came entirely from a sharp rise in orders for airplanes, a volatile component that fluctuates from month to month.

The Commerce Department report put total orders for durable goods, items expected to last three or more years, at $108.2 billion in December, $4.4 billion above the November level.

It marked the first increase since August and the biggest rise since an 8.2% advance in November, 1984. Orders had fallen 0.9% in September, 2% in October and 0.7% in November.

For all of 1985, orders rose just 3.8%, the smallest increase since 1982, a recession year when orders dropped by 10.2%. Last year's performance was far below a 14.8% rise in orders in 1984.

U.S. manufacturers were battered last year by stiff foreign competition as the strong value of the dollar made cheap foreign goods attractive to Americans while reducing the demand for domestic products overseas.

The Reagan Administration said the big rise in December orders was further evidence that the economy picked up strength last month.

Commerce Secretary Malcolm Baldrige said it "adds to the evidence of strengthening economic activity at year-end" and he predicted further gains resulting from lower interest rates and declines in the value of the dollar.

However, private economists noted that without a 24.8% jump in the transportation category, the result of a big pickup in demand for aircraft, total orders would have dropped 2% last month.

"While there was good news for aircraft manufacturers, it doesn't tell us much about the general strength of the economy," said David Wyss, an economist with Data Resources, a Lexington, Mass., consulting firm.

Wyss said the report showed general weakness in capital goods industries, and he predicted that the economy would grow at an annual rate of only 2.5% to 3% in the first half of 1986, which would be below the 4% predicted by the Reagan Administration.

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