In further evidence that the recession may be coming to an end, the government reported yesterday that factory orders climbed by 0.7 percent in November while construction spending rose by 3.5 percent.
Many experts believe that the economy is now on the verge of recovery, with the way being led by housing and increased spending on durable consumer goods. However, these experts agree that the upturn is likely to be extremely slow when it does begin and that unemployment will come down slowly.
The November rise in new orders for manufactured goods was slight, and much smaller than the 4.1 percent decline reported for October.
The Commerce Department's chief economist, Robert Ortner, said an increase in factory orders "is always a good result." But he added that "it was somewhat a drop in the bucket, and we need a lot more drops" to ensure recovery.
Shipments of manufactured goods also were up slightly in November, the Commerce Department reports said. These climbed by 0.2 percent to $152.8 billion. Meanwhile, inventories declined by 0.9 percent, or $2.4 billion, from October. Durable-goods manufacturers accounted for all of the inventory decline, with almost all categories of durable goods showing a drop.
A second wave of inventory reduction during the final quarter of last year was a major factor depressing the gross national product during that quarter; the Commerce Department's "flash" forecast for fourth-quarter GNP was for an annual rate decline of 2.2 percent. If business succeeds in reducing unwanted inventories, however, then it is more likely to respond to an upturn in demand by increasing production.
Allen Sinai of Data Resources Inc. said "I'm encouraged to see a good-sized decline in inventories and the rise in new orders and . . . shipments." He said yesterday's reports were "another sign that we are moving rapidly toward recovery" and commented that the bottom of the recession may turn out to have been in December.
Ortner cautioned that manufacturers' shipments still exceeded orders in November, for the 16th consecutive month. Until orders pick up substantially, there is little incentive for producers to increase factory output and employment.
The orders report showed that durable-goods orders climbed 1.4 percent from October compared with an estimate of 1.9 percent in an advance report published earlier. Within the capital-goods industry, new orders for nondefense goods were unchanged in November from the previous month.
Construction spending in November was estimated at a seasonally adjusted annual rate of $237.2 billion, 3 percent above the level a year earlier. Housing construction was up 5.8 percent between October and November, the Commerce Department said.
Meanwhile the Federal Reserve reported a decline in the narrow M1 measure of the money supply in the week ending Dec. 22. M1, which includes cash and checking accounts at financial institutions, dropped from $480.5 billion to $478.1 billion, the Federal Reserve said. These figures have been distorted by banking changes, including the introduction of new accounts designed to compete with money market funds. Preliminary estimates from yesterday's money-supply figures suggested that the new accounts, which began in mid-December, averaged $52 billion at banks and thrift institutions during the week ending Dec. 22. See Money Supply Chart, D15.
Commercial and industrial loans on the books of the nation's large banks rose $257 million in the same week, the Federal Reserve Bank of New York reported. The previous week had seen a decline of $758 million.