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Durables spur nervousness
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September 25, 1997: 9:04 a.m. ET
Strong orders in August could signal heating economy, higher interest rates
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NEW YORK (CNNfn) - Orders for durable goods pushed sharply higher last month, the Commerce Department said Thursday, eliciting unease among analysts who see a strengthening economy.
"I'm really nervous," said Stephen Slifer, economist at Lehman Brothers.
Durable goods, those goods that are expected to last three years or longer like cars and washing machines, were ordered at a 2.7 percent higher rate in August, or a seasonally adjusted $186.6 billion. Wall Street had been looking for a more moderate 0.8 percent gain.
Those stronger figures were coupled with a report from the Department of Labor showing a drop in jobless claims, a possible indicator of a tightening labor market.
Commerce also revised its July durable goods orders figures to reflect a 0.1 percent gain instead of the 0.3 percent decline originally reported.
The higher figure was not the result of transportation sector strength, which often can skew the figure upwards. Excluding transportation, orders rose 2.0 percent, the largest gain for that figure since February's 4.2 percent increase.
Defense sector orders were not to blame, either. Excluding that sector, orders gained 2.8 percent in August. Non-defense durables have not risen that much since a 5.1 percent gain in January.
The prime mover behind the higher figures appears to be electronics equipment orders, which made their largest jump ever, leaping 28.4 percent in August. The subset of transportation equipment gained 5.2 percent.
Durables goods figures are one of the indicators used by the Federal Reserve to gauge inflationary pressures in the U.S. economy. Stronger orders could signal strong consumer demand.
If the Federal Reserve were to see looming inflation, they could raise interest rates when they meet next week.
-- Randy Schultz
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