Smokestack Comeback

Orders to U.S. factories for big-ticket goods jumped 1.1 percent in April, with demand especially strong for cars, communications equipment and machinery.

The solid advance came after orders for durable goods — items expected to last at least three years — edged up 0.2 percent in March, the Commerce Department reported Thursday.

With April's increase, orders for costly manufactured goods have gone up for five straight months, a good sign for the nation's manufacturers, which had borne the brunt of last year's recession and saw hundred of thousands of jobs evaporate.

Thursday's report — along with other recent data — show that the manufacturing sector is on the mend.

In a related development, new claims for unemployment benefits fell by 9,000 in the latest week, but remained stubbornly high with a slowly improving economy failing to translate into job growth.

The level of initial claims for state benefits, which gives an early reading on the situation of the labor market, slipped to 416,000 in the May 18 week from a revised 425,000 in the prior week.

But claims did not drop as far as Wall Street economists' forecast of 412,000. The Labor Department had originally reported new claims in the May 11 week at 418,000.

In a sign the pace of hiring has slowed, the number of unemployed workers who continued to collect benefits rose for the fourth straight week to 3.87 million in the May 11 week, the latest week for which data are available. This was at its highest since 3.88 million in the Feb. 26, 1983 week.

The 1.1 percent increase in durable-goods orders was much larger than many analysts were expecting. They were forecasting a tiny 0.1 percent rise.

Factories are boosting production as many businesses need to replenish inventories. Throughout last year, companies worked hard to get rid of excess stocks of unsold goods that had piled up during the slump.

Citing uncertainties about the vitality of the recovery, the Federal Reserve earlier this month decided to leave short term interest rates unchanged at 40-year lows.

Low interest rates should motivate consumers, whose spending accounts for two-thirds of all economic activity, to continue to buy and for businesses to step up investment, which would help along the economic recovery.

Federal Reserve Chairman Alan Greenspan has warned that the recovery could be less than sizzling because consumers, who kept buying throughout the slump, might not have a lot of pent-up demand coming out of it.

But in April, new orders for cars, trucks and automobile parts shot up 12 percent, the biggest increase since August 1998, suggesting that consumers' appetite for such goods was healthy. In March, orders for cars and trucks fell 1.2 percent.

Even with the increase in automobiles, orders for all transportation equipment dropped by 2.6 percent in April. That's because of a huge drop in orders for airplanes, which plunged 37.1 percent.

Excluding the volatile transportation component, where orders can bounce around from month to month, durable-goods orders grew 2.9 percent in April, the biggest increase since October.

Gains were broad-based last month.

Orders for communications equipment rose 12 percent, after a 11 percent decline in March. For machinery, orders went up 4 percent following a 1.5 percent drop. Orders for primary metals — including steel — rose 5.1 percent, on top of a 2.3 percent increase. And, orders for electrical equipment and household appliances, grew 7.6 percent, after falling 2 percent.

However, orders for computers continued to be soft. Those orders dipped 0.3 percent in April, following a 7.5 percent decline, suggesting that the high-tech sector is continuing to struggle with the lingering effects of the recession.