Durable Orders, Consumer Confidence Augur Well For Future

Jan. 13, 2005
By John S. McClenahen In the hours just before Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee made their Oct. 28 decision on short-term interest rates, the U.S. Commerce Department and the Conference Board released ...
ByJohn S. McClenahen In the hours just before Chairman Alan Greenspan and his colleagues on the Federal Open Market Committee made their Oct. 28 decision on short-term interest rates, the U.S. Commerce Department and the Conference Board released encouraging economic data. New orders for manufactured durable goods -- products designed to last three years or more -- increased 0.8% in September to $176.3 billion, the Commerce Department reported. "Most importantly, the report shows that capital spending is rebounding," says Daniel J. Meckstroth, chief economist at Manufacturers Alliance/MAPI, an Arlington, Va.-based business and public policy research group. "Amazingly though, manufacturers continue to cut inventories rather than allow the full increase in new orders flow through to shipments," he notes. Inventories of manufactured durables fell 0.7% to $261.3 billion in September. However, "the inventory liquidation will end as soon as rising production necessitates more work-in-progress inventory," states Meckstroth. Some 90 minutes after the Commerce Department released its data, the Conference Board, a New York-based business research group, put out its consumer confidence index for October. After five months of decline, the closely watched index rose to 81.1 (1985=100) this month. "A more favorable job market was a major factor in the turnaround," says Lynn Franco, director of the Conference Board's Consumer Research Center. What's more, its expectations index also rose this month, to 90.7 from 88.5 in September, suggesting that consumers believe the U.S. job market will continue to improve. "With the holiday season around the corner, this improvement in consumers' spirits is a good omen for upcoming retail sales," says Franco.

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