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Orders for Manufactured Goods Rebound from April Loss

July 3, 1990

WASHINGTON (AP) _ Orders to factories for manufactured goods in May regained their 2.1 percent loss of a month earlier, the government reported Tuesday, and analysts said industry may be starting to recover from its slump.

″The manufacturing sector seems to have gone through the worst and has a slight upward tilt,″ said Robert G. Dederick, chief economist with the Northern Trust Co. of Chicago. ″But the real question is whether it’s a false dawn and whether it will fade again.″

The Commerce Department said orders for both durable and non-durable goods rebounded 2.1 percent to a seasonally adjusted $240.9 billion.

The size of the May increase had been expected by many analysts. At the same time, the size of the April decline was a slight improvement from the 2.3 percent drop first reported.

It was the third gain in orders since they dropped 5.5 percent in January and their steepest decline since a 7.0 percent decrease in December 1974. All major categories advanced in May except non-durable orders, which were unchanged at $112.4 billion after inching up 0.2 percent in April.

But analysts expressed concern over the strength of any manufacturing turnaround, saying much of it is coming from U.S. exports while demand from American consumers has weakened recently.

Exports represented just 14.2 percent of the 1989 gross national product - the nation’s total output of goods and services - while personal consumption contributed 64.2 percent.

″Another weakness that has really been making the industrial sector go sideways is capital spending,″ said Priscilla Trumbull, an economist with the WEFA Group in Bala Cynwyd, Pa. ″But we seem to be seeing a little bit of improvement there.″

Non-defense capital spending excluding aircraft edged up 0.1 percent in May after back-to-back 1.1 percent declines in the preceding two months. This category often is often viewed as a barometer of business investment plans.

″If this is part of a turnaround, it’s still pretty much in the embryonic stage,″ said Gordon Richards, director of economic policy at the National Association of Manufacturers.

Nevertheless, Richards and other analysts said the factory orders report was the latest of several suggesting the manufacturing slump may be about to reverse itself.

Orders for durable goods - big-ticket items expected to last at least three years - jumped 4.0 percent to $128.6 billion, nearly recovering the 4.1 percent decline in April.

The often volatile defense orders also rose, up 19.2 percent to $10.0 billion after gains of 4.8 percent and 4.5 percent. Excluding the defense category, orders were up 1.5 percent.

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