WASHINGTON -- Orders to U.S. factories for big-ticket goods rebounded in January, and analysts said that increases the chance the Federal Reserve may boost interest rates to cool an economy that shows signs of picking up speed.
Electronics and electrical equipment, down the previous two months, led last month's stronger-than-expected 3.6 percent increase in factory orders -- the first overall gain in three months. Orders also advanced for primary metals, motor vehicles and parts and aircraft, the Commerce Department said yesterday.
Manufacturing strength "plays into the camp that the Fed may have to tighten in the not too distant future," said Kevin Flanagan, an economist at Dean Witter Reynolds in New York.
On Wednesday, Fed Chairman Alan Greenspan warned investors that higher borrowing costs, which tend to throttle-back growth, may be necessary as a pre-emptive strike against inflation.
In other economic reports yesterday:
Labor Department figures showed first-time claims for unemployment benefits rose by 11,000 last week for the first gain in more than a month. Still, the level of claims -- a seasonally adjusted 316,000 -- is historically low and points to continued strength in labor markets.
Businesses stepped up hiring efforts, judging by the Conference Board's index of help-wanted ads in 51 newspapers across the country. The New York-based business research group said its help-wanted index rose two points, to 87 in January from 85 in December.
In financial markets, the benchmark 30-year Treasury bond fell for the second day in a row after the forced dose of reality from Greenspan. The bond fell 3/8 in late New York trading, pushing up its yield 3 basis points to 6.81 percent.
U.S. stocks also fell. After slumping 55 points Wednesday, the Dow Jones industrial average dropped 58.11 points yesterday to close at 6,925.07. The dollar was lower against other major foreign currencies.
January's reversal in orders for durable goods -- expensive products made to last three or more years -- pointed to strength across the board. Shipments and unfilled orders, two gauges of demand, also rebounded from December, when durable goods orders fell a revised 1.8 percent, previously reported as a 1.9 percent loss. Before the new report, analysts had expected a 1.2 percent gain for January. "The beat goes on," said Robert Dederick, an economic consultant at the Northern Trust Co., in Chicago.
Some analysts found the report misleading. The data "appears stronger at first glance, than perhaps the details," said Merrill Lynch economist Bruce Steinberg. The increase, he noted, came after the declines in December and November. "In addition, capital goods shipments excluding aircraft and parts fell 2.6 percent," he said. "That suggests capital goods will not be making a large contribution to first-quarter GDP growth after falling in the fourth quarter."
Pub Date: 2/28/97