Orders for durable goods jumped 0.9% last month

June 24, 1994|By New York Times News Service

WASHINGTON -- Fresh evidence of a decelerating economy appeared yesterday as a moderate overall rise in new orders for durable goods was accompanied by the fourth consecutive decline in orders for equipment to be used by nonmilitary manufacturers.

Orders for durable goods -- items from toasters to helicopters designed to last at least three years -- climbed nine-tenths of 1 percent in May, aided by another double-digit gain in military contracts, Commerce Department figures show.

While this advance was somewhat bigger than expected, many analysts regarded the report overall as pointing to a slackening of economic growth.

"The economy continues to expand modestly, slowing from the rapid-fire growth of six months ago," said Robert Barr, deputy chief economist for the U.S. Chamber of Commerce.

He added that durable goods, generally big-ticket items requiring financing, might be an early casualty of the rise in interest rates, which began last fall and was accelerated by the Federal Reserve in February.

In a separate report, the Labor Department said yesterday that first-time claims for unemployment benefits inched up 3,000, to 352,000, last week.

On a four-week average, initial claims edged down to 355,000, a bit lower than in late spring but otherwise the highest in more than a year, according to Merrill Lynch & Co.

The reports released yesterday will likely serve as further evidence for the Federal Reserve that the economy, while still expanding, is cooling, and that it need not rush to raise rates again to head off inflation.

"Here's an indicator that's steady but not out of control," said Patrick Moriarty, chief investment officer at Bank Julius Baer in New York, referring to the report on durable goods.

The May rise, he noted, was the result of increases for military goods, which is not likely to continue, and in orders for commercial jets, which are delivered over long periods.

At the same time, the economy seems strong enough to withstand another Fed tightening if it should decide higher interest rates are needed to support the dollar in international currency markets.

The advance in durable good orders for May, to $148.4 billion, included a 2.2 percent jump for transportation equipment, a 4.7 percent rise for the much smaller primary metals group and a negligible one-tenth of 1 percent rise for industrial machinery and equipment.

On the other hand, new orders for electronic and other electrical equipment skidded 5 percent, a result thought by some to be an anomaly in light of a long period of robust growth.

Excluding military goods, orders were up four-tenths of 1 percent, less than half the overall gain, the report showed.

Within capital goods industries, orders for durable goods rose 1.1 percent overall but were down eight-tenths of 1 percent -- the fourth-consecutive decline -- when tanks, planes and other military items were excluded.

Military orders alone soared 11.9 percent, to $7.1 billion, after a 28.7 percent leap in April and a 20.1 percent drop in March.

Nonmilitary capital goods excluding aircraft and parts slumped 2.5 percent after a decline of three-tenths of 1 percent in April.

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