New orders for manufactured goods fell 0.7 percent in August as a big drop in orders for nondurable items such as apparel offset a 0.5 percent increase in orders for durable goods, the Commerce Department reported yesterday.
The figure for durables represented a substantial upward revision from an advance report that had shown a 0.9 percent decline. However, one key portion, orders for nondefense capital goods, still went down 4.9 percent for its third monthly decline in a row.
The overall drop in new orders followed a 1.8 percent increase in July and a 1.6 percent decline in June. The August total, $192.6 billion, remained below the $193.7 billion level of May.
Analysts watch the new-orders figures closely for clues to future levels of production. Yesterday's report indicated clearly that no new surge in output is likely from the nation's factories, analysts said. At the same time, the gain in durables orders was the second in a row and moved that figure almost back to its May level -- suggesting that production apparently is not about to fall substantially, either.
The decline in orders for some types of goods came in response to rising inventories, which, in turn, were caused by flat or declining sales for such goods. Inventories of durables rose 1.4 percent to $187.2 billion, with machinery and transportation equipment accounting for virtually all of the increase, the department said. Stocks of nondurable goods rose in virtually all industries and were up 0.9 percent overall, reaching $96.4 billion.
Despite large increases in business spending for equipment this year, inventories have jumped to a level higher than in either 1979 or 1982, according to Townsend-Greenspan & Co., an economic consulting firm.
"The rapid growth in business fixed investment requires a larger pipeline of goods and materials than prevailed in the typical expansion," Townsend-Greenspan told its clients this week. "Even granting this, inventories in this sector appear top-heavy, particularly in light of the poor order patterns in recent months."
As for nondefense capital goods, the firm added, "If we do not see a better order pattern by October, we would begin to grow concerned about the sustainability of the cpaital goods expansion in 1985."
A similar buildup of goods has caused retailers to cut back on their orders. Consumer spending was weak in both July and August, and reports about stores' success in September have been mixed. However, most forecasters expect consumer spending to pick up again soon.
"With the confidence of consumers high and real disposable personal income posting one of its largest gains in many years in 1984 , Christmas sales could be even better than now anticipated by retailers , reducing stocks to more normal levels once again," Townsend-Greenspan said.
Shipments of manufactured goods rose 0.7 percent in August to a level of $191.9 billion. With new orders rising slightly more than that, the backlog of unfilled orders rose 0.2 percent to $359.7 billion, Commerce said.
Shipments of durable goods climbed 2.7 percent, primarily because of a greater-than-normal rise in motor vehicle and parts shipments during the industry's model-year changeover. Apart from that industry, durables shipments were up 1.3 percent in August.
Meanwhile, shipments of nondurables fell 1.5 percent, "the largest since the end of the recession," the department said. The declines were widespread, with the largest coming in food products.
The ratio of inventories to shipments rose to 1.48 -- that is, there were enough goods on hand to satisfy the current level of shipments for 1.48 months. The ratio was up from 1.47 in July and 1.45 in May. As the ratio rises, it means that stocks of goods on hand are relatively more ample compared to the amount being shipped to buyers.