My picture
Wednesday, January 20, 2021
1996 | 07 | 26 | Articles | The Wall Street Journal | Business | Economics
Enter your email address above to start
receiving email updates from this site.
This Page
The Wall Street Journal
July 26, 1996
Durable-Goods Orders Slipped In June; Jobless Claims Eased

WASHINGTON — New orders for durable goods fell 0.8% in June, the Commerce Department said, signaling that the economy’s strength isn’t unbridled.

June’s decline partially unraveled the huge 4.2% jump in May orders. That gain was just one piece of economic data in the robustly healthy second quarter that caused financial markets to wonder if the economy was in danger of overheating.

But June’s report helped temper that fear a bit. Treasurys ended modestly higher Thursday, with the bellwether 30-year bond rising nearly 3/8 to yield 7.01%.

More than half of the June decline in orders for durable goods, or big-ticket items such as appliances and automobiles expected to last more than three years, came from a plunge in new aircraft bookings. That was partly offset by a 31.6% increase in defense orders. Stripping out the volatile defense and aircraft sectors, total new orders rose 1.3% in June.

Although the manufacturing sector has shown erratic results month-to-month during the second quarter, overall orders have grown faster than they did a year earlier. "The basic trend is that orders are increasing gradually, with bouncing along the way," said economist Richard Rippe of Prudential Securities.

Unfilled Orders Rose Again

While new orders fell in June, unfilled orders increased for the second month in a row, suggesting that manufacturing activity will continue to be solid as factories work to keep up with demand, analysts said.

Economist James Annable of First National Bank of Chicago said the report indicates that the economy has finally completed corrections for inventory rebuilding, the General Motors Corp. strike that hobbled auto production and brutal winter weather in the first quarter. "We’re getting a regression back to moderate growth," he said.

Analysts are closely watching for signs of a slowdown. In recent days, Federal Reserve Chairman Alan Greenspan has said policy makers will be monitoring even the smallest changes in the economy to gauge whether growth is easing. Moderation of growth would make it less likely that the Fed would raise interest rates at its meeting next month.

Unemployment Claims Fell

But the government’s durable-goods report tends to be "so erratic" that a June decline in orders alone probably won’t do much to convince the Fed of a slowdown, said David Orr, an economist at First Union Corp. in Charlotte, N.C. The Fed chief "says he needs persuasive evidence. This is not persuasive evidence," Mr. Orr said.

Next week’s economic data will be much more important to the Fed. That’s when the government releases its first estimate of second-quarter growth, the July employment report, and the quarterly cost-wage index.

Separately, the Labor Department said Thursday that first-time unemployment claims dropped by a surprising 45,000 to 322,000 last week. Although some of the decline may be due to auto manufacturers beginning production of 1997 models, the data may suggest an improved employment picture, analysts said.

The four-week moving average of jobless claims, considered to be a better barometer of labor-market health, fell by 8,000 to 352,000 claims.