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3 Upbeat Economic Reports Announced

November 03, 1987|From Reuters

WASHINGTON — Construction spending and orders for new manufactured goods rose strongly in September, the government said Monday, while worker productivity in the July-September quarter jumped smartly.

The White House hailed the reports as evidence that the economy is still growing, but economists shrugged off the news and said economic expansion would slow in the aftermath of the October stock market collapse.

The Commerce Department said factory orders in September went up $2.31 billion, or 1.1%, to $205.7 billion while construction spending jumped $6.2 billion, or 1.5%, to a seasonally adjusted annual rate of $406.3 billion.

In its report, the Labor Department said productivity, or output per worker, went up a healthy 2.6% between July and September after rising a revised 1.4% in the second quarter.

Unit labor costs--a measure of the cost of production from wages and salaries--were up only 1.3% in the third quarter after rising 1.5% in the second quarter.

"We're looking for factory orders to tail off dramatically and probably decline as we move into November, December and early next year," said economist Chris Varvares of the St. Louis forecasting firm Laurence Meyer & Associates.

White House Optimistic

"This may well be the last significant monthly increase in new orders until we get to the middle of next year," he added.

The White House said the statistics indicated that "the evidence points to continuing economic expansion."

Spokesman Marlin Fitzwater said the productivity gains reflected the improvement in the overseas competitiveness of American manufacturers. He said the Administration disagreed with forecasts that the country was headed for a recession.

Some economists expressed doubt about the construction industry's ability to keep growing after widespread losses from consumer and corporate wealth since the record Oct. 19 508-point loss in the Dow Jones industrial average.

"This report belies what lies ahead for construction," said Tom Megan, an economist with Evans Economics Inc. in Washington. Megan said he expected new-home building to fall quickly in the remaining months of this year.

"Our forecast is for recession during the first two quarters of 1988," Megan said in assessing the construction and new orders figures. "We expect this data to be reversed in coming months."

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