Orders of ‘Big Ticket’ Goods Still Weak
Undated (AP) _ Factory orders for ″big ticket″ durable goods rose a slight 0.4 percent in May after three months of decline, but the increase came exclusively from a surge in demand for military equipment, the Commerce Department said Tuesday.
In other economic news, the Senate approved a landmark tax-overhaul bill, and the Commerce Department said the United States became the world’s biggest debtor last year.
The weakness in durable goods orders raised hopes for lower interest rates, sparking broad rallies in the stock and bond markets. The dollar stabilized after its sharp losses of Monday.
Durable goods orders rose $379 million over the April level to a total of $104.1 billion last month, the Commerce Department said. But analysts noted the orders would have plunged 2 percent without a big rise in demand for military hardware.
″Overall orders have been stagnant for the last two years and they just can’t seem to get untracked,″ said David Wyss, an economist with Data Resources Inc., a private forecasting firm.
Commerce Secretary Malcolm Baldrige said he believed factory orders were being hurt by uncertainty over the final outcome of the congressional debate on tax reform. He predicted an upturn in the months ahead.
Meanwhile, the government said the United States surged past Brazil and Mexico to become the world’s biggest debtor last year.
The nation’s deficit at the end of 1985 was $107.4 billion, a dramatic deterioration from the previous year, when the country had a small investment surplus of $4.4 billion, the Commerce Department said.
The country has not been a net debtor since 1914. This means that foreigners now own more U.S. investments than Americans have in foreign investments.
President Reagan has dismissed the change as a non-event, contending it just shows how attractive U.S. investments are to foreigners.
But many private analysts have expressed worries that the U.S. economy could be held hostage to the whims of foreign investors.
The Senate voted 97-3 to approve the biggest tax-overhaul bill in at least three decades, a plan that makes deep cuts in tax rates while reducing or eliminating a variety of popular exemptions and deductions.
On Wall Street, the Dow Jones average of 30 industrials gained 11.29 points to close at 1,875.55.
In the credit markets, prices of long-term government bonds, which move in the opposite direction from interest rates, rose about $10 for every $1,000 in face value.
The dollar stabilized late in the day, leveling off after a steep selloff that began suddenly Monday in the United States and spread earlier Tuesday to Japanese and European foreign exchange markets.