Battered economy shows mixed signals

  • Thursday, November 29, 2001 9:00pm
  • Business

Associated Press

WASHINGTON — The economy, declared in recession just days ago, is showing mixed signals for the future. Orders for big-ticket goods are up by the largest amount in at least nine years, but layoffs are rising, too.

The latest batch of economic data released Thursday provided something for both optimists and pessimists regarding the prospects for an economic recovery.

Optimists pointed to the big jump in new orders for manufactured goods as an encouraging sign the downturn will be short and shallow. Pessimists worried that the surge in layoffs, along with expectations of higher unemployment, could make consumers retrench, pulling the economy deeper into recession.

Despite such mixed opinions, many analysts agree that the economy is extremely fragile and believe the Federal Reserve will probably cut interest rates for an 11th time this year at its next meeting on Dec. 11.

In a rare bright spot for the nation’s battered manufacturing sector, orders to U.S. factories soared 12.8 percent in October, reflecting stronger demand for airplanes, cars and computers, the Commerce Department said. It was the first increase since May and the largest since the government began keeping records based on the current classification system in March 1992.

The rebound in durable goods — items expected to last at least three years — came after new orders dropped by 9.2 percent in September.

"New orders are the seeds of future production," said Sal Guatieri, economist with Bank of Montreal and Harris Bank, adding that the report suggests businesses are more confident in the economic outlook and may be planning to increase investment.

"Inventories are quite lean and businesses may have to raise production in coming months," he said.

While welcoming the increase in big-ticket orders, National Association of Manufacturers president Jerry Jasinowski didn’t believe it was a harbinger of a business recovery.

"Most of the rise in new orders is clearly due to a response to Sept. 11, the war in Afghanistan and an incentive-driven pickup in auto sales — not to a general revival in the business climate," Jasinowski said.

Copyright ©2001 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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