Durables Data Suggest Turnaround Hasn't Occurred Yet

By John S. McClenahen A broad-based turnaround in U.S. manufacturing, the point when lots of companies start responding to new orders with increased production, is probably still a couple of months away. True, just-released U.S. Commerce Dept. data show shipments of airplanes, cars, industrial machinery, and other durable goods increasing 0.1% in March to $199.9 billion, the first such uptick since last September. However, "while shipments rose for the first time in six months, the sluggish 0.1% increase clearly indicates that firms are still ridding themselves of the inventories they built up in the latter half of last year," says David Huether, an economist at the National Assn. of Manufacturers, Washington. "Manufacturers should start responding to new orders with increased production around midyear." In March, new orders for manufactured durables increased 3% from their February mark to $205.1 billion. But that figure is skewed by a 21.4% increase in transportation-equipment new orders -- mainly civilian aircraft. Without those orders, the new-orders total would have decreased 1.8%, with new orders for industrial-machinery and primary-metals producers among those falling off from February. For the first quarter of 2001, even with the rebound for manufactured durables in March, total new orders fell at an annual rate of 17.6%, notes UBS Warburg economist Maury Harris. Orders for "core" capital goods declined at a 5.3% annual rate in the quarter, he calculates.

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