Durable-Goods Orders Rise

Friday, January 26th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) â€” Orders to U.S. factories for big-ticket manufactured goods rose by a suprising 2.2 percent in December, the biggest gain in three months, as demand grew for airplanes and electronic equipment.

The Commerce Department reported Friday that orders for durable goods â€” items expected to last at least three years â€” increased to a seasonally adjusted $214.3 billion last month, following a 1.8 percent rise in November.

That surprised many analysts. They were expecting durable-goods orders to fall by 2.0 percent, given the weakening economy. The 2.2 percent rise was the biggest since September, when durable-goods orders rose by the same amount.

For all of 2000, durable goods, including items from air conditioners to airplanes, rose 6.5 percent, but was down from the 7.3 percent gain in 1999, which marked the best showing in five years.

While Friday's report contained some good news for manufacturers, the industry has been particularly hard-hit by the rapidly slowing economy.

Last week, the Federal Reserve reported that factory production fell by 1.1 percent in December, the biggest one-month drop since March 1991, when the last recession was ending.

Meanwhile, manufacturers cut 62,000 jobs in December including 8,000 in the auto industry where automakers idled production lines in an effort to deal with a huge backlog of unsold cars.

In December, orders for transportation equipment posted the biggest gain, rising 14.6 percent, mostly due to higher demand for airplanes and aircraft parts. In November, transportation orders rose 7.3 percent.

The transportation sector is often volatile from month to month because it includes such costly items as airplaines and ships. Excluding transportation, overall orders fell by 1.4 percent in December, the second decrease in the last three months.

Orders for electronic and other electrical equipment, including semiconductors and home appliances, increased by 2.4 percent in December, following a 6.7 percent rise.

Industrial machinery, including computers and machine tools, however, saw orders fall by 5.3 percent last month, on top of a 0.3 percent decline the month before.

And, primary metals, the category that includes steel, saw orders drop by 3.5 percent in December, after a 2.6 percent decrease.

Shipments of big-ticket durable goods, a good signal of current demand, fell for the third month in a row. Shipments declined by 0.5 percent in December, 1.1 percent in November and 2.0 percent in October, a sign of the economic slowdown, which began to take hold in the last several months of the year.

For all of 2000, shipments rose 5.1 percent, down from a 5.8 percent gain in 1999.

The Federal Reserve, worried that the economy was slowing too much and could fall into a recession, cut interest rates on Jan. 3 by a half percentage point. The action occured in a rare move between regularly scehduled Fed meetings on interest rate policy.

On Thursday, Fed Chairman Alan Greenspan, in testimony before Congress, expressed serious concern about the weakening economy, hinting that that more rate cuts are likely. Economists viewed that as signaling another rate cut at the Fed's next meeting Jan. 30-31, possibly as big as another half-point.