New orders received by manufacturers for durable goods rose a small 0.4 percent in May, regaining only about one-tenth of the ground lost in declines in the three previous months, the Commerce Department reported yesterday.
A big jump in the highly volatile figures for defense orders was itself greater than the overall gain last month. Excluding defense goods, new orders fell 2 percent in May.
Commerce Secretary Malcolm Baldrige noted in a statement: "May's durable goods orders were a sluggish 1.1 percent above their level a year ago." In fact, the level of new orders was lower last month than in all but three months since May 1985.
The absence of a significant pickup in orders suggests that industrial production, which dropped in March, April and May, is not about to turn upward in a significant way, analysts said.
Baldrige attributed some of the lack of new orders to uncertainty over provisions of the tax reform legislation now headed for a House-Senate conference after its approval by the Senate yesterday. "I am optimistic that activity in the durable-goods industries will pick up in the second half, as it already has in housing and consumer spending," Baldrige said.
Most economic forecasters, like the Commerce secretary, are optimistic that economic growth will accelerate in the second half of the year. Nevertheless, as time passes and statistics such as those for durable goods show little if any sign of such an acceleration, some forecasters have begun to lower their expectations somewhat.
For instance, businesses have been lowering their capital investment plans, according to surveys by the Commerce Department and others. And recently the Conference Board, an industry-backed New York research group, reported a 10 percent decline in the amount of money appropriated by major manufacturing corporations in the first quarter for capital spending. Excluding the oil and gas industry, which has been hard hit by falling prices, the decline was still 5.4 percent.
Yesterday's report from Commerce indicated that new orders for nondefense capital goods "were flat at $26.2 billion" in May after declining 8.6 percent from February to April. Unfilled orders for this category of durable goods fell 0.4 percent to $132.4 billion. Unfilled orders reached a peak of $137.1 billion in August 1984 and have shown a gradual down trend since then, the report said.
New orders for all durable goods increased by $379 million, or 0.4 percent, to $104.13 billion, after seasonal adjustment. Apart from defense, orders for transportation equipment rose $1.7 billion, or 6.5 percent, to $28.2 billion, but new machinery orders fell back $800 million, or 2.4 percent, to $31.5 billion, the report said.
Orders for primary metals were off $800 million to $8.9 billion, an 8 percent drop. Metals orders have declined an average of 1.6 percent a month since reaching a high of $11.2 billion in April 1985, the report said.