January drop in durable goods orders: a blip or a trend?

By , Staff writer of The Christian Science Monitor

It may have been the new tax law. Or the bad weather that has blanketed the country. In either case, the result was a record drop in January in new orders for computers, office equipment, autos, aircraft, and other durable goods. The government also reported personal consumption fell 2 percent. Economists caution, however, against reading too much into these falls, noting the economy still appears to be chugging along.

Even so, in a preliminary report, the Commerce Department said yesterday that new civilian durable-goods orders fell 9.9 percent, from $110.4 billion to $102.1 billion. Military orders rose sharply, resulting in an overall drop of 7.5 percent. The largest drop came in nondefense capital goods such as aircraft and computers, which plummeted 19.7 percent.

Businessmen believe the decline is not worrisome, however. ``Historically, January is our weakest month of the year,'' says Joe Gavaghan, a spokesman for Prime Computers in Natick, Mass. ``It is meaningless as an indicator of what our order rates will be.''

Recommended: Could you pass a US citizenship test?

Economists also point out that many companies placed orders in December to take advantage of the accelerated depreciation schedule under the old tax law. Thus, December's order rate was high. The heavy snows that blanketed many parts of the country in January may also have affected orders, economists add.

Robert Ortner, a Commerce Department economist, says the numbers are ``somewhat disappointing.'' He does caution against interpreting the numbers as indicative of a drop in the economy, however. ``It remains to be seen how much of a statistical blip this is,'' he says, ``and how much of a rebound we see in February or March.''

Private economists likewise do not view the numbers as an indication the economy is sputtering. Ken Goldstein, an economist with the Conference Board, a private business research organization in New York, says it would take several months of similar reports to cause concern. ``It's not the best of all possible news,'' he says, ``but it does not necessarily lead to negative implications.''

But David Berson, chief financial economist at Wharton Econometrics in Philadelphia, says he believes the numbers indicate the economy will continue to grow slowly in the first quarter. He cautions, however, that the numbers are often revised sharply. Next week the Commerce Department will issue its regular report on January orders.

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...