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Archive for Thursday, September 28, 2000

Big-ticket orders rise in August

September 28, 2000

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— Stronger demand for airplanes and electronics helped orders for big-ticket manufactured goods bounce back somewhat in August from a record plunge the month before.

The Commerce Department reported Wednesday that orders for durable goods rose by a solid 2.9 percent last month to a seasonally adjusted annual rate of $216.1 billion.

The Federal Reserve has raised interest rates six times during the past 15 months to slow the economy and keep inflation under control.

The bigger-than-expected increase came after durable goods orders plunged by a record 13.1 percent in July, according to revised government figures.

August's moderate rebound reflects an economy that is slowing to a more sustainable but still healthy pace, economists and business representatives said.

"The economy is still sailing with the wind at her back, although the modest nature of the turnaround ... shows that the wind is calming from gale force to a strong, steady gust," said Jerry Jasinowski, president of the National Association of Manufacturers.

Many economists were expecting durable goods orders to rise by 2.5 percent in August.

The pickup last month underscores the strength of spending by U.S. businesses on equipment and plant, which helps fuel economic growth.

"The scarcity of labor plus the need to adopt the latest technologies and improve productivity will sustain the boom as a durable trend and potent contributor to future U.S. economic growth," said Ken Mayland, economist with ClearView Economics.

The Federal Reserve has raised interest rates six times during the past 15 months to slow the economy and keep inflation under control.

Many economists believe the Fed's rate increases are working and expect the central bank to leave rates unchanged during its meeting next week, as well as for the rest of this year.

On Wall Street, stock prices failed to rebound as investors concerned about third-quarter results again punished the shares of poor performers. The Dow Jones industrial average lost 2.96 points to close at 10,628.36.

A 6.5 percent increase in orders for transportation equipment mostly reflecting stronger demand for airplanes and aircraft parts led August's gain. In July, transportation orders fell by a record 32.4 percent.

Excluding the volatile transportation sector, durable goods orders rose 1.9 percent in August, the eighth increase in the past 10 months. In July, these orders dropped 5.5 percent. The transportation sector can swing widely from month to month because it includes costly items including airplanes, ships and military equipment.

Orders for electronics and electrical equipment including semiconductors, circuit boards and home appliances grew by 2.8 percent last month, largely because of higher demand for electronic components. That followed an 18.9 percent decline in July.

Orders for industrial machinery including computers and machine tools, which have risen in five of the past six months increased 1.5 percent in August, following a 5 percent drop.

But orders for primary metals, the category that includes steel, declined by 0.2 percent last month, on top of a 2.3 percent decrease in July.

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