Path: bloom-picayune.mit.edu!enterpoop.mit.edu!snorkelwacker.mit.edu!americast.com!americast.com!americast-post Newsgroups: americast.twt.misc From: americast-post@AmeriCast.Com Organization: American Cybercasting Approved: americast-post@AmeriCast.com Subject: Two key indicators bring good news Date: Wed, 25 Nov 92 16:20:05 EST Message-ID: Lines: 122 \SE C;MONEY \SS (WS) \HD Two key indicators bring good news \BY FROM COMBINED DISPATCHES American consumers' confidence in the economy improved markedly this month, a business research group said yesterday, as the government reported that orders to U.S. factories for big-ticket items surged in October. The Conference Board, a private business group in New York, said its index of consumer sentiment, which was set at 100 in 1985, rose to 65.5 in November from 54.6 last month. The Conference Board did not specifically attribute the increase to the presidential election Nov. 3, but economists said they had little doubt that was a key factor. "This sure adds insult to injury to President Bush," said economist Cynthia Latta of DRI-McGraw Hill, a Lexington, Mass., forecasting firm. "It says to me that people are encouraged that something is going to be done. They don't know what, but they feel something will be done that will improve the economy." On the other hand, Fabian Linden, executive director of the Conference Board's Consumer Research Center, said the election appeared to play little role in the gain. "People tend to respond to their own particular environment and region," he said. Meanwhile, the Commerce Department reported that orders for longlasting durable goods, ranging from toaster ovens to industrial turbines, totaled a seasonally adjusted $124.4 billion in October, 3.9 percent more than the month before and the biggest rise in 15 months. Economists considered both reports good news for the economy as President-elect Bill Clinton prepares to begin his administration. And the stock market staged a moderate rally in response. The Dow Jones industrial average gained more than 40 points before profit-taking lowered prices. The index ended at 3,248.70, up 25.66 points. But the broader market - reflected in the Nasdaq, NYSE composite and S&P 500 indexes - set new highs. However, analysts cautioned that both reports may make economic conditions look better than they are. For instance, the increase in durable-goods orders was concentrated in aircraft and automobiles. Without the 20 percent surge in transportation equipment, orders would have edged down by 0.7 percent. "Contrary to initial appearances, the sharp rise in durable-goods orders does not signal a decisive break with the pattern of stagnation that has gripped the economy for several years," said Gordon Richards of the National Association of Manufacturers. The confidence index took its biggest jump since the end of the Persian Gulf war. "In the history of the survey, it was a very substantial improvement," Mr. Linden said. But "it is still at a level which is historically associated with a lackluster economy," he added. "We have a long way to go before we are in a full recovery," he said. The survey is based on a sample of 5,000 households, with varying incomes and ages, around the nation. Consumer confidence is central to economic growth. As optimism picks up, people tend to spend more money, spurring demand and production. Yet because the job market remains tight, rekindled confidence will not result in an economic boom, but it may make people more willing to splurge a bit on Christmas shopping, said Miss Latta of DRI-McGraw Hill. More confidence "won't put more money into people's pockets but it might make them more willing to spend the money that's already there," she said. The October increase in durable-goods orders followed a 0.3 percent rise in September. Orders had fallen in August and July, risen in June and fallen in May. Although most of the October gain came from transportation, other areas showed strength as well, including primary metals such as steel and aluminum, up 5.1 percent, and electrical equipment, up 1.5 percent. However, orders for industrial machinery were down 4.5 percent. The highly volatile military-goods sector, which overlaps the aircraft category, shot up 42 percent after a 20 percent drop the month before. Excluding defense, orders rose 2.2 percent. Economists warned that the economy cannot depend on defense spending to throw off its sluggishness. "We have seen the future of the defense industry, and we know it's not increases of 42 percent. President-elect Clinton has made that painfully clear," said economist Robert Brusca of Nikko Securities Co. International Inc. in New York. Nondefense capital goods, considered a good barometer of businesses' investment plans, rose 2.5 percent, but excluding aircraft they were down 2.8 percent. In another positive sign, the backlog of unfilled orders was virtually unchanged in October at $453 billion, after decreasing for 13 consecutive months. Economists have been warning that the shrinking backlog - an indication that factories were having little trouble keeping up with customer demand - could lead to new layoffs. Shipments of durable goods - defined as items expected to last three or more years - fell 0.6 percent in October to $124.6 billion. This article is copyright 1992 The Washington Times. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM