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Date: Wed, 25 Nov 92 12:57:53 EST
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11/25/92


TITLE Economy Shows Signs Of Life In Early Fall

But Big Gains In Durables, Confidence Aren't Broad-Based
#m#ak/tlj#m#Thomas McArdle In New York Both consumer confidence
and durable goods orders -two key indicators of the nation's
economic health -showed healthy gains in data released yesterday.

But the same numbers also suggest that the breadth of the econom-
ic recovery that many analysts expect will greet the incoming
Clinton administration is still in question.  Durable goods rose
an unexpectedly strong 3.9% in October, the best gain in 15
months, the Commerce Department said. In addition, September ord-
ers were revised to show a 0.3% gain, instead of the 0.1% drop
first reported.

Durable goods orders increased 4.8% from a year earlier. Orders
rose to $124.4 billion in October, compared with $119.7 billion
in September.

Separately, the Conference Board's index of consumer confidence
registered an almost 11-point gain in November, to 65.5% from the
54.6% recorded in October.  The expectation index compiled by the
Conference Board soared to 86%, a gain of more than 15% from the
previous month and a sign that consumers view the future more op-
timistically.  The jump in confidence was expected by economists
as the natural reaction of a presidential election in which power
changes hands from one party to another.  "People are moderately
more positive in their appraisal of prevailing conditions, and
significantly more optimistic in their expectations for the im-
mediate months ahead," the Conference Board said. "Buying plans,
on balance, are marginally stronger." "Retailers report that
business has been somewhat more lively, and there also appears to
be some improvement in other sectors of the economy, such as in-
dustrial production and employment


Economy Shows Signs Of Life In Early Fall


opportunities," said Fabian Linden, executive director of the
Conference Board's Consumer Research Center.  The study also not-
ed, however, that "a large number of study participants, more
than two out of every five, continue to classify prevailing busi-
ness conditions as 'bad,' while less than one in eight say that
they are 'good.' " The Conference Board survey questions a broad
range of 5,000 consumers throughout the country.

That report follows similar good news in the University of Michi-
gan consumer survey, which many economists consider superior to
the Conference Board's because more in-depth questions are asked.
The Michigan analysis reported significant gains from October to
November in seven of the eight categories it covers, including
current economic conditions, consumer expectations and business
conditions over the next year.  The exception was expectations
for personal finances, which didn't change last month. The big-
gest jump was in consumers' current personal finances.  "The
thing about confidence is that consumers can't spend it," warned
Douglas Lee, an economist at Washington Analysis Corp. "You can
hope that when people feel good, they'll spend a bit more.  "But
if you look at the income and consumption numbers over the past
year, you find that people have been spending most of what
they've been making, and for them to spend more . . . would mean
that they might have to go out and borrow to do that. I really
don't think people feel that good." The government's durable
goods numbers present a hopeful picture for the economy, although
economists said there were signs that orders aren't quite as
strong as they appear.  The strong 3.9% gain was mainly due to a
20% rise in orders for transportation equipment. Excluding tran-
sportation orders, overall orders in October actually fell 0.7%
after a 2.1% increase in September.  Orders for defense goods, a
highly volatile sector, surged 42% last month after falling 20%
in September. Excluding defense, orders in October grew 2.2%
after increasing by 1.4% in September.  Durable goods shipments
declined slightly, which disappointed a number of economists.
The shipments figure, often seen as an indicator of the economy's
current strength, included a 1.1% decline in non-defense capital
goods and a 2.6% drop in nonelectrical machinery, largely in the
heavy metals sector.  Nonetheless, there was also a broad in-
crease of 1.3% in electrical machinery shipments and a 2.2% boost
in the transportation quarter.  There were other positive signs
as well.  Non-defense capital goods orders, where gains usually
indicate that businesses are revving up investments in new equip-
ment, rose 2.5% last month after gaining 8.5% in September.  The
level of unfilled durable orders posted no gain. When unfilled
orders rise, it's generally a sign of growing demand for goods as
manufacturers strain to fill order backlogs.  Although the lack
of change in unfilled orders is not ordinarily a good sign, it
ended a string of 13 consecutive monthly declines.  "The economy
has really been characterized by this two steps forward and one
step back trend," said Jeff Thredgold, chief economist with Key
Corp. in Salt Lake City.  "We've had 18 months of this very anem-
ic recovery. When you subtract the very surprising strength in
the transportation side, then you just have some tidbits of
stronger economic performance, but not real underlying strength.
It's a smattering of good news, but not enough to get excited
about," Thredgold said.  The good news is also unevenly distri-
buted in the nation, he added.

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