Durable-goods orders jump 2.9 percent in May

Tuesday, June 26th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ Orders to U.S. factories for costly manufactured goods rebounded last month from a sharp drop in April as demand for cars and semiconductors registered especially strong increases.

The Commerce Department reported Tuesday that orders for durable goods _ items expected to last at least three years _ jumped by 2.9 percent last month, a much stronger performance than the 0.4 percent rise many analysts were predicting.

May's increase followed a steep 5.5 percent decline in April and was the best showing since February.

The report, which showed an increased appetite for many big-ticket goods, provided a bright spot for manufacturers. That sector has been hit hardest by the economic slowdown that has gripped the country since the second half of last year.

To stave off recession, the Federal Reserve has slashed interest rates five times this year, driving down borrowing costs to their lowest point in seven years.

Many economists believe the Fed will cut rates for a sixth time on Wednesday. However, they are divided over whether it will be by another half-point or a quarter-point.

To cope with the economic slowdown, manufacturers have sharply cut back production and laid off thousands of workers. Other recent reports on factory activity, however, have suggested manufacturing, which many believe is in a recession of its own, is struggling with slumping demand. A report by the Fed showed that industrial activity plunged in May for the eighth month in a row, stifling hopes that the industry's darkest days had passed.

But Tuesday's report showed that in May, orders for transportation equipment, led by stronger demand for automobiles and car parts, rose by 3.4 percent, following a 9.4 percent drop in April.

Excluding the volatile transportation category, new orders rose 2.7 percent in May, the first gain in the last three months.

Computers and electronic products saw orders increase by 2.7 percent, after a 13.5 percent decline. All the strength came from a whopping 35.3 percent rise in orders for semiconductors. Orders for computers and communications equipment fell.

Orders for electrical equipment and home appliances grew by 3.4 percent, after dipping 0.1 percent in April.

Industrial machinery saw orders rise by 2.6 percent in May, on top of a 0.7 percent increase.

Primary metals, the category that includes steel, rose by 5.9 percent in May, the biggest increase since February 1999. That followed a 1.6 percent drop in April.

In another report, the American Bankers Association said the delinquency rate on credit card accounts 30 or more days past due dipped to a seasonally adjusted 2.99 percent in the first three months of this year. That was down from 3.34 percent in the prior quarter and an improvement over the 3.28 percent posted for the first quarter a year ago.