YOU ARE HERE: LAT HomeCollections

Gains in 2 Gauges Stir Optimism for Economic Growth

November 01, 1986|MICHAEL WINES | Times Staff Writer

WASHINGTON — Two more gauges of future economic growth posted encouraging gains in September, the Commerce Department said Friday, stirring new hopes that two years of foreign-trade and manufacturing woes are easing and that faster economic expansion is finally at hand.

The volume of new orders for factory goods rose 3.4% in September after falling 0.9% in August and rising 1.4% in July. The increase was the biggest since November, 1984, and followed nearly 1 1/2 years in which the pace of orders has been more or less stagnant.

A broader gauge of future growth, the index of leading economic indicators, ticked upward by 0.4% in September after a 0.1% decline in August. The index has risen 5.56% in the last 12 months, compared to 3% and 3.5% in the preceding two years.

The figures followed Commerce Department reports released Thursday that showed that the growth of the trade deficit slowed slightly in September and that housing sales, stagnant for five months, sprang upward by 10.6%.

Some private forecasters said the data suggests that consumers are finally pressing U.S. factories to make some of the goods that they have been buying from foreigners for so long and in such vast quantities.

"Now we're going to see the industrial sector finally take off," said Martin Lefkowitz, an economist with a nonprofit research arm of the U.S. Chamber of Commerce. "Domestically, we're going to start producing more of what we consume."

Speakes Sees 'New Boom'

To a White House campaigning for struggling Republican Senate candidates, the numbers were welcome political fodder. White House spokesman Larry Speakes, with President Reagan in Idaho, said the data "points to a new boom for American business" and "a rising tide of prosperity for more and more Americans."

But many forecasters, noting that the economy has often flirted with a boom in the last two years, were more reserved.

"Is this really a sustainable turnaround, or is it a short-term pop in the numbers? To us, it looks like this isn't sustainable beyond the end of the year," said Deborah Allen Olivier, president of Claremont Economics, a forecaster in Claremont, Calif. "I don't think it means a whole lot."

Overly Rosy Glow

Others agreed that short-term factors--especially auto sales gimmicks and a buying spree aimed at beating the 1987 tax-law changes--give this week's figures an overly rosy glow. Unless the nation's trade deficit is truly easing, "it's very easy to imagine a recession of some moderate dimension during 1987," cautioned Roger Brinner, senior economist at Data Resources Inc., of Lexington, Mass.

"But we feel it's more likely that we'll have the trade turnaround," he added.

Brinner and Lefkowitz said Friday's figures indicate that factories are gearing up in the belief that foreigners' share of the U.S. market is falling and that U.S. goods are starting to grab a larger share of foreign markets.

The economy so far has managed wobbly growth amid withering foreign competition because consumers have bought enough to keep both domestic and worldwide factories busy. A trade turnaround is vital because economists expect domestic consumer demand to tail off.

Led by Big Items

September's jump in factory orders was led by big-ticket items such as industrial machinery, in which orders rose about 15%. Orders for autos rose 4.7%, and computers and office machines jumped 6%, but other durable goods orders--for instruments, mining and building equipment, planes and missiles--dropped.

Orders for less expensive "non-durable" goods also rose 1.6% overall, led by food products and a 19.4% jump in tobacco orders.

Seven of 11 leading-indicators components rose in September: net new businesses, money supply, credit demand, factory equipment and consumer goods orders, unemployment claims and firms suffering slowed deliveries from suppliers.

Indexes for building permits, stock prices and materials prices fell, while the length of the average factory workweek was unchanged at 40.8 hours.

Los Angeles Times Articles