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Orders for Durable Goods Spurt 6.7% in December

January 27, 1988|Associated Press

WASHINGTON — Orders for big-ticket durable goods, propelled by a big demand for aircraft, shot up 6.7% in December, the biggest increase in 15 months, the government said Tuesday.

Many economists termed the increase surprisingly strong and said it was the best evidence yet that the country would avoid a recession in the aftermath of October's stock market collapse.

However, one economist cautioned against reading too much into one month's figures, especially since almost three-fourths of the increase came from a sharp rise in a single category, aircraft orders.

The Commerce Department said orders for durable goods reached a seasonally adjusted $118.7 billion last month, an increase of $7.4 billion from November.

The 6.7% advance was the biggest monthly increase since a 6.9% rise in September, 1986. It followed a 0.1% increase in November, an upward revision from an original report that had orders falling slightly.

Drop in Dollar Helps

"This report is not only encouraging, but a very pleasant surprise," said Commerce Under Secretary Robert Ortner. "I had been somewhat apprehensive because this is one of the areas we have been watching for signs of the effects of the stock market decline."

Ortner and other economists said December's performance showed that manufacturing demand remained strong two months after the 508-point collapse of stock prices on Oct. 19.

The December orders figure closed out the best year for American manufacturers since 1984. Orders for the last 12 months were $1.3 trillion, up 7.8% over 1986. It was the best showing since a 13% rise in orders in 1984 as American firms gained from a decline in the value of the dollar, which made their products competitive again on overseas markets.

By contrast, orders edged up 0.5% in 1986 and 0.7% in 1985, years when American businesses were losing sales to foreign manufacturers.

Aircraft Orders Jump

David Wyss, an economist with Data Resources Inc., said the December advance showed demand for American exports remained strong and should provide momentum in 1988.

"This was an enormous increase. It is an encouraging sign that businesses remained confident after the crash," Wyss said.

The government will release today its estimate for economic growth in the October-December quarter. Many economists predicted that it would show the gross national product expanding at a robust pace of about 3%.

Jerry Jasinowski, chief economist of the National Assn. of Manufacturers, was less enthusiastic about the December increase. He said he still is expecting a significant slowdown in growth in the first half of 1988 that will stem from sluggish spending on the part of consumers.

"Most of the manufacturing firms we have talked to recently report orders were slowing in the second part of December. I don't see the orders report as a great sign of strength because it was dominated by aircraft orders," Jasinowski said.

Transportation orders climbed to $33.5 billion in December, a 16.3% rise over November, reflecting a big rise in orders received by Boeing Co. A company spokesman said Boeing logged $3.1 billion in orders in December for 41 planes, with 27 of them to be shipped to foreign buyers.

Many economists believe that rising export sales will provide enough strength to offset an expected slowdown in consumer spending this year and keep the country out of a recession.

Orders for non-defense capital goods rose 13.3% to $34.1 billion last month. This category is expected to provide strength this year as manufacturers step up spending to expand and modernize to keep up with increased export demand.

Orders in the volatile military category shot up 13.7% in December to a seasonally adjusted total of $11.3 billion following a slight 0.7% decline in November.

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