Friday, August 25, 2000
Economy shows cooler signs
Orders for durable goods go down
By Jeannine Aversa
The Associated Press
WASHINGTON — Orders to U.S. factories for costly manufactured goods in July took their biggest-ever recorded dive as demand fell sharply for airplanes and electronic equipment, additional evidence that the economy is finally slowing.
The Commerce Department said Thursday that the larger-than-expected 12.4 percent decline left orders for durable goods — items expected to last at least three years — at a seasonally adjusted annual rate of $212.4 billion.
“The bottom line for America's manufacturers is that the economy is slowing to a more sustainable pace, with strong noninflationary growth continuing but at a less accelerated rate,” said National Association of Manufacturers economist Dave Huether.
In the past 14 months, the Federal Reserve has boosted short-term interest rates six times in an effort to cool the economy and keep inflation from escalating.
The durable-goods report “shows the economy is just moving at a slower pace than it had, but that doesn't mean it's crawled to a stop. The economy continues to forge ahead,” said Richard Yamarone, economist with Argus Research Corp.
Tuesday, the central bank decided not to raise rates, the second meeting in a row in which it left rates unchanged.
In a second report, the number of Americans filing new claims for unemployment benefits rose last week for the fourth week in a row, by 4,000 to 314,000. That suggests the tight labor market is “loosening around the edges,” Merrill Lynch economist Stan Shipley said.
July's durable-goods performance largely reflected a record 31.7 percent decline in orders for transportation equipment, mostly due to lower demand for airplane and aircraft parts, the government said.
Despite that, GE Aircraft Engines has said engine production in Evendale is on par with a year ago when its CFM56 engine production peaked at 1,080 units. A spokeswoman said Thursday the jet engine maker has seen no weakening in sales.
Excluding the volatile transportation sector, durable-goods orders fell 4.8 percent, the second decrease this year.
While many analysts were surprised by July's sharper-than-expected decline in overall orders, they didn't find it worrisome given the report's notorious volatility.
“Am I concerned that the manufacturing sector of the economy is in some sort of trouble? The answer to that is clearly no,” said Ken Mayland, economist with ClearView Economics.
Mr. Mayland and other economists noted that even with last month's plunge, new orders for durable goods so far this year are running 9.9 percent higher than for the same period a year ago.
Enquirer reporter Mike Boyer contributed.
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