Domestic Demand

Orders for U.S. machine tools recovered from two straight monthly drops by rising sharply in June, reflecting an improved domestic economy but weakening foreign demand, the industry's trade group said Sunday. Economists said the monthly figures reported by the Assn. for Manufacturing Technology showed that companies now feel comfortable enough about the U.S. economy to invest again, but that lower exports threaten the recovery.

A drive by Japanese corporations to export more to make up for a sluggish domestic economy pushed Japan's trade surplus to $10.2 billion in February, a historic high for a single month, according to figures released Wednesday. The announcement by the Ministry of Finance quickly raised fears of worsening trade friction with the United States.

This was to be President Mikhail S. Gorbachev's day of glory as he received the Nobel Peace Prize in recognition of the dramatic way in which his reforms of the Soviet Union have changed the world. But instead of receiving the prize in Oslo and outlining his vision of a peaceful new world order in his Nobel address, Gorbachev will be presiding today over a meeting of the Soviet Communist Party's Central Committee on what can be done to reverse the country's economic disintegration.

A weak yen is deepening the slump that South Korean car makers have found themselves in because of a drop in exports, but industry and government officials are determined to get the industry back on track. "Despite the problems we have, car manufacturing should play a major role in creating jobs and gross national product in the future," said Nam Chung-woo, director of the Trade Ministry's Transportation Machinery Division. "We learn from errors.

When Park Kyu Soon, 31, was about to take out her new car for the first time, her colleagues at the advertising agency where she works thought the occasion deserved a celebration. They embellished the antenna on the car, which a salesman had delivered to the company parking lot, with a bevy of ribbons. A designer at the agency made an elaborately lettered sign reading "Beginner" for her to tape to the back window. All 40 agency employees gathered to see her drive off.

Japan said today its economy grew 2.2% in the first quarter of 1989, as the pace of growth picked up from the 0.8% rise in the last quarter of 1988. The report showed what government officials called an ideal performance in the January-March period, but private economists said they see some signs of troubles ahead. "Japan's economy is on an ideal growth path, bolstered by firm domestic demand," Shinyasu Hoshino, vice minister for economic planning, told reporters. That is good news for Japan's trading partners, who have been pressing Tokyo to consume more at home and export less in order to cut the country's huge trade surplus.

Spurred by brisk domestic demand, Japan's production of motor vehicles in April hit a monthly record of 1,091,977 units, up 1.4% over a year ago, the Japan Automobile Manufacturers' Assn. reported today. The association said domestic sales grew 6.2% to 569,797 units, a record for any April. Exports decreased about 10% because of sluggish demand overseas, coupled with the yen's appreciation, the association said. Introduction in April of a lower sales tax, replacing the higher commodity levy, was responsible for brisk sales, association officials said.

Japanese Prime Minister Yasuhiro Nakasone will return to Tokyo today, intent on pursuing tax reform that already has snarled debate in Parliament for three months, he told reporters traveling with him here. Nakasone also disclosed for the first time that he will seek enactment "by around August" of a supplementary budget, the centerpiece of a 5-trillion-yen ($35.7 billion) fiscal expenditure program designed to expand domestic demand in the economy.