Durable-goods orders fall 10.5%

December 28, 1990|By New York Times News Service

WASHINGTON -- In yet another ominous economic pulse-taking, the government reported yesterday that orders to factories making all sorts of long-lived goods from watches to locomotives tumbled 10.5 percent in November, equaling a 32-year record decline established in January of this year.

The drop in orders for durable goods was particularly sharp for transportation equipment, but most major industries were weak. The decline pulled order levels back to where they were in early 1988.

Analysts called the figures a solid confirmation that the economy has entered recession. Statistics in recent weeks have shown that unemployment is rising, industrial output is down, retail sales are weak and housing remains in a deep slump.

The National Bureau of Economic Research, the government-designated arbiter of the business cycle, said this week that a recession probably began between June and September.

"It points to a lot of weakness," David S. Klein, an economist for Paine Webber Inc., said of the durables report.

The National Association of Manufacturers said the report suggested a "deepening recession," but, among the bad news, it found some mitigating factors, including reasons for expecting a rebound in orders for aircraft and, perhaps, automobiles.

[The Associated Press reported that consumer confidence edged lower in December but that Americans had a slightly more optimistic outlook for the economy in the next six months, the Conference Board reported Thursday.

[The confidence index inched lower earlier this year as the economy weakened and then plunged after Iraq's invasion of Kuwait in August. A lack of consumer confidence was cited consistently as the main reason for a drop in retail spending after the Middle East crisis began.]

Yesterday's report on durable goods -- products designed to last at least three years -- also showed that shipments from factories fell 3.6 percent in November, to the lowest level since January. Backlogs of unfilled orders fell 1.1 percent, the biggest monthly decline since one of that amount in November 1985.

The unfilled-orders statistic is used to help predict the direction of the economy. The decline led many economists to lower expectations for today's release of the Index of Leading Economic Indicators.

A consensus forecast now is that the decline in the index will be more than 1 percent. A November decline would represent the fifth straight monthly negative reading in the index.

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