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URGENT Durable Goods Orders in Record Plunge

February 27, 1990

WASHINGTON (AP) _ Orders to U.S. factories for durable goods plunged 10.5 percent in January, the biggest decline since orders first were tracked 32 years ago, the government reported today. A drop in aircraft orders led the way.

The Commerce Department said orders for durable goods - big-ticket items expected to last more than three years - totaled a seasonally adjusted $118.2 billion last month after increasing a revised 1.4 percent in December. That figure originally was reported to be up 2.5 percent.

The steepest decline until January’s record was a 9.2 percent fall in February 1982.

’Most of the decline was in transportation equipment,″ the department said. ″Aircraft and parts, which had been unusually high in the last several months, accounted for nearly half of the January decline in transportation, although motor vehicles and parts and shipbuilding and tanks were both down sharply.″

Aircraft orders represented one-third of the overall decline. Auto production also fell in January as tens of thousands of auto workers were laid off to help the industry shrink swollen inventories. The department considers car orders and production to be the same.

The drop helped pull overall transportation orders down 27.6 percent to $27.9 billion.

Much of the economy’s recent weakness has been concentrated in durable goods as the Federal Reserve sought for more than a year to drive down inflation by keeping a tight rein on credit. The result has been higher interest rates, which adversely affect durable goods orders because they often are financed by loans.

Excluding the transportation industry, orders fell 3.4 percent.

The closely watched non-defense capital goods sector, often a barometer of business investment plans, fell 13.7 percent, reversing December’s 14.2 percent gain. The sector also posted gains in October and November.

Electrical machinery orders dropped 17.6 percent to $18.8 billion after rising 5.6 percent in December and 7.3 percent in November. Virtually all of the decrease was in communications equipment, the Commerce Department said.

Orders for non-electrical machinery, including computers and a wide variety of industrial equipment, rose 2.6 percent to $22.3 billion after falling 3.9 percent in December.

Primary metals orders were up 1.5 percent to $11.1 billion following a 2.8 percent decline in December.

New orders for defense capital goods, a highly volatile sector, plummeted 36 percent to $6.3 billion for the lowest one-month volume of orders since January 1987. Defense orders had slipped 12.9 percent in December after rising 17.7 percent in November. Excluding defense, orders would have been off 3.4 percent.

Shipments of durable goods in January dropped 3.7 percent to $117.7 billion after falling 0.8 percent a month earlier.

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