Manufacturing, feeding off the lower dollar and stronger export markets, made its strongest showing in 15 months yesterday as the Commerce Department reported that factory orders for durable goods -- items such as machinery, transportation equipment, and lumber and metal products -- shot up 6.7 percent last month.
The increase, which topped off the best year for manufacturers since 1984, showed that manufacturing resumed a strong comeback in December, seemingly impervious to the shock delivered to the economy from the stock market collapse Oct. 19.
December's seasonally adjusted total of $118.7 billion was the fourth consecutive monthly gain in durable goods orders, following modest November and October increases of 0.1 percent and 1.6 percent, respectively.
Much of the December increase was in aircraft, reflecting a huge order recently placed for Boeing jets. But some analysts said that increases in a wide range of other products indicated that portions of the economy were reindustrializing.
"U.S. manufacturing is in at least a miniboom," said Allen Sinai, chief economist for the Boston Co. Economic Advisors Inc. "The orders cap a year of increasingly strong activity in manufacturing."
Some economists reacted cautiously to the December figures, citing the monthly volatility of the report, the impact of the aircraft order and the expectation that the performance will not be matched in January.
For all of 1987, when manufacturing began a noticeable resurgence, orders totaled $1.3 trillion, or almost 7.8 percent over the previous year. It was manufacturing's best performance since 1984, when orders rose 13 percent.
Many U.S. industries -- not long ago dismissed as the stepchildren of the new service economy -- are making solid gains, though growth may be hampered by a reluctance of companies to expand and invest after several years of cutbacks.
Signs of health in the manufacturing sector include an increase in industrial production, an uptick in spending on plant and equipment, growth in manufacturing productivity, and the addition of 214,000 jobs in the last five months in the 10 industries that make up the durable goods segment.
Employment in electrical manufacturing, for example, hit 2.1 million in December 1987, very near its peak in 1979, according to the Bureau of Labor Statistics.
Steel companies such as the USS division of USX Corp., formerly United States Steel Corp., have seen orders improve to the point where "capacity is being tested," said Thomas Graham, the steel maker's president. Although Graham noted that some of the pickup was due to inventory rebuilding, the company has been in a position to raise prices, and add workers and shifts.
The durable goods report showed a $1.2 billion, or 11 percent, increase in orders for primary metals, including steel.
Even at companies such as Deere & Co., where orders largely depend on the health of the domestic farm economy, there is a turnaround. "The business is coming back very well," said Brian Alm, a Deere spokesman. "But we have been down so low that we have quite a hill to climb."
Although Deere is not feeling the capacity strains of companies in industries such as paper, textiles and steel, it is increasing its production schedule 20 percent this year as demand for farm equipment picks up.
"You may hear talk of recession on Wall Street," said David Hale, chief economist for Kemper Financial Services, "but when you go into the heartland states, the mood is very different. It's overheating."
If indeed that is the case, the worry becomes "industrial inflation" that could cause higher interest rates. In the fourth quarter of last year, though, manufacturers were using 82.2 percent of their overall production capacity, up from 79.8 percent a year earlier and far from the peak of 87.7 percent in October 1973.
"I am not as concerned as I might have been because domestic demand is slowing more than people realize," said Lawrence Chimerine, chairman of the WEFA Group, a consulting firm in Bala Cynwyd, Pa. "Inflation and price increases will be selective with no cumulative upward trend."
Chimerine sees a "flip-flop" in the economy that will turn it toward strengthened export-oriented industries from domestic ones such as retailing and construction that had been big parts of expanding the economy.
Other economists, such as Jerry Jasinowski of the National Association of Manufacturers, caution that it would be "a mistake to read too much strength into this report."
"Everybody I have talked to said they see December orders a little bit softer," said Jasinowski, who sees a slow first quarter because of curtailment of consumer spending, a seasonal drop in capital spending and some inventory trimming.
Robert H. Hayes, professor of the management of technology at Harvard Business School, saw possible clouds over manufacturing.
"Why not before and why not more than it is?" asked Hayes, noting that manufacturing performance should be even better considering the drop in U.S. prices relative to other world producers.
"It is springing back from the depths of three to four years ago, but it will not be back to where it was eight to nine years ago," he said.