Manufacturing Orders Off 1.7% in December

WASHINGTON — Orders for costly manufactured goods took a surprising tumble in December, the Commerce Department reported Wednesday, helping to trim the 1996 gain to the smallest in three years and further easing fears of an overheating economy.

“The latest economic data offer no support for the case that the U.S. economy is growing too fast,” said economist Bruce Steinberg of Merrill Lynch & Co. “Clearly, the economy is not overheating.”

The Commerce Department reported that orders for durable goods--products such as aircraft and appliances expected to last more than three years--fell by an identical 1.7% in both November and December.

The December drop--the seventh during 1996--contrasted with analysts’ expectations of a 1.2% advance, and the revised November decline was even larger than the 1.5% decrease reported earlier.

As a result, orders for all of 1996 rose just 5.5%, down from 7.2% in 1995 and the smallest increase since a 5.4% gain in 1993. Orders totaled $2.03 trillion for the year, including a seasonally adjusted $168.9 billion in December.

Orders are a key gauge of the nation’s manufacturing sector and declines could lead to slower production and fewer jobs.

Analysts said the report bolsters arguments against any economy-slowing interest rate increase when Federal Reserve Board policy-makers meet next week.

Previous data, including the government’s labor cost report released Tuesday, have indicated that inflation remains under control.

Bond prices closed at session highs Wednesday after the Treasury Department said its initial sale of 10-year, inflation-indexed bonds was a success.

Stocks also rebounded from Tuesday’s late sell-off, with the Dow Jones industrial average gaining 84.66 points.

A sharp 12.5% drop in demand for electronic and other electrical equipment such as circuit boards and communications gear led the December decline. These orders had fallen 10.2% in November after rising 17.2% in October.

Also contributing to the decline were virtually flat transportation orders. Increases in shipbuilding, tanks and railroad equipment more than offset decreases in motor vehicles and aircraft.

Excluding transportation, orders were off 2.2%, the second straight monthly decline.

However, primary-metals orders rose 2.2% after a 0.6% advance in November. And tickets for industrial equipment such as computers and household appliances increased 1.5%, the first gain since July.

Orders for nonmilitary capital goods, excluding aircraft, fell 2.8%, the second straight drop.

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Durable Goods

New orders, in billions of dollars, seasonally adjusted:

December: $168.9

Source: Commerce Department