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Factory Order Figure Rises 1.2% in November

December 25, 1991|From Reuter

WASHINGTON — Orders for durable goods jumped 1.2% in November, the Commerce Department said Tuesday, raising hopes that basic industries are beginning to recover from the recession.

The monthly gain, which surprised experts, was the second in a row and pushed up the value of new orders for expensive items such as airplanes, computer systems and machinery to $124.7 billion.

Analysts had expected November goods orders to fall 1.3%. Orders rose a revised 2.6% in October.

With the November data, shipments of finished goods showed their longest-running improvement since the economy began to emerge from the 1981-83 recession.

Orders for capital goods outside the defense sector, often seen as an indication of business investment in new equipment, jumped 13.2% after gaining 3.2% in October.

"It's very encouraging on balance," said David Wyss, an economist at DRI/McGraw Hill Inc., an economic consulting firm in Lexington, Mass. "The continuing strength in shipments particularly shows manufacturing is alive and well despite reports to the contrary."

Shipments in November rose 0.7% to $127.2 billion, the eighth straight monthly gain.

Durable goods, items expected to last three years or more, are closely watched by economists because they help gauge the strength of demand and future employment prospects.

Analysts saw no sign of an immediate boost to employment, however, saying orders were buoyed by backlogged demand for commercial aircraft.

Transportation orders accounted for most of the November increase, rising 3.9% to $33.9 billion after an 11.2% jump in October.

Most of it was aircraft orders, which offset weaker demand for cars and fewer military ship and tank orders.

First Interstate Bancorp economist Jerry Jordan in Los Angeles said improved orders were laying the basis for growth by the middle of next year even if the bulk of last month's rise came from airplanes.

"It's going to start to support a pattern of better numbers," Jordan said.

Consumers have been jarred by massive job cuts at big corporations such as General Motors Corp., which said last week that it will close 21 plants and cut 74,000 jobs over four years.

But DRI/McGraw Hill's Wyss said smaller manufacturers have held their own by winning more export sales.

Analysts said the Federal Reserve's interest rate cuts the past year will leave consumers with more money in their pockets by encouraging home mortgage refinancing.

The nation's central bank Friday slashed the discount rate it charges on loans to banks to a 27-year low of 3.5% in a bid to stir economic activity.

"All the elements are in place for growth," Jordan said.

"We've had a massive dose of monetary stimulation even before last Friday's Fed move. Last week was just juice in the punch bowl."

Added Lou Crandall, chief economist at R. H. Wrightson & Associates Inc. in New York: "The trend is basically up, just not up enough to guarantee a solid recovery.

"But it's not inconsistent with the idea it lays the groundwork for an upturn in the first half of 1992."

Orders for electronic and electrical equipment, which includes computers, rose 1.2% to $17.6 billion after climbing 3.6% in October.

But defense orders, always a volatile category, plunged 38.9% after a 50.3% surge in October.

Excluding defense, total durable goods orders were up 4.1% in November after a 0.3% increase in October.

Durable Goods Orders Rise

New orders in billions of dollars, seasonally adjusted

Nov., '91: 124.7

Oct., '91: 123.3

Nov., '90: 116.2

Source: Commerce Dewpartment

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