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Durable Goods Orders Rise by 5.2 Percent

Tuesday January 29, 9:10 am ET
By Martin Crutsinger, AP Economics Writer

Orders for Big-Ticket Manufactured Goods Jump by Largest Amount in 5 Months

WASHINGTON (AP) -- Orders to factories for big-ticket manufactured goods soared in December by the largest amount in five months, welcome news for an economy buffeted by talk of recession.

The 5.2 percent increase in orders was a surprise finish for the manufacturing sector at year's end -- a segment of the economy considered to have had a poor year.

The increase in orders, as reported Tuesday by the Commerce Department, was far larger than had been expected. The strength came from a big increase in demand for commercial aircraft, but even excluding the transportation sector, orders posted a solid 2.6 percent gain.

The December orders increase was more than double what had been expected. Analysts were looking for a much weaker performance, given that a key gauge of manufacturing activity had fallen to the weakest reading since April 2003. The Institute for Supply Management manufacturing index dipped to 47.7 for December. Any reading below 50 is considered recession territory for manufacturing.

The unexpectedly big jump in December closed out a lackluster year for manufacturers. Orders for the total year managed to rise by just 0.97 percent following much bigger increases of 6.31 percent in 2006 and 9.45 percent in 2005. It was the poorest showing since orders actually fell by 3.17 percent in 2002, a year when the country was still struggling to emerge from the 2001 recession.

I'm curious if the lower dollar helped boost orders in December. It certainly seems possible given the boost it has given other areas of the economy. People around the world can finally afford to purchase U.S. goods and it certainly seems likely that the longer the dollar stays around where it is the more exports the U.S. will have. My Dad's business has all of a sudden seen a rise in international orders, and another local business has also been receiving more orders from outside the country.

I've never really been able to tell if the lower dollar is necessarily a good or bad thing. I don't think it's a terribly bad thing, but given the nature of how it got to where it is I wouldn't say it's good for the economy in the long run (the Fed has been printing a lot of money). It's hard to say (as with everything else).

David K
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