Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, March 27, 1991                   TAG: 9103270098
SECTION: BUSINESS                    PAGE: A-3   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

CONFIDENCE RISES/ WILL TO BUY IS BACK, BUT WALLET'S WEAK

The Commerce Department said orders for durable goods, long-lasting items such as appliances and airplanes, dropped 0.3 percent in February, the third setback in the past four months.

But in a sign that better days could be ahead, a closely watched gauge of consumer confidence staged a giant rebound following the war victory, rising to 81 in March from 59.4 in February.

It was the biggest one-month gain in the 24-year history of the survey by the Conference Board.

However, private economists cautioned against reading too much into the big jump in sentiment. They said consumers might feel better, but they are still saddled with heavy debt and weak income growth, reflecting cascading layoffs in many industries.

"Confidence is up but incomes are down, and in terms of the performance of the economy, income levels will be the predominant factor," said Bruce Steinberg, an economist with Merrill Lynch in New York. "Consumers may have the will, but they lack the wallet."

"Our view is that the pieces for a recovery are pretty much in place and we will get a recovery, certainly by midyear," said Samuel Kahan, chief financial economist for Fuji Securities Inc. of Chicago.

However, Richard Rahn, chief economist for the U.S. Chamber of Commerce, said the widespread weakness in manufacturing orders in February raised the specter of further production cutbacks and layoffs in manufacturing.

In the past two years, more than 1 million workers have lost manufacturing jobs; layoffs totaled 127,000 in February alone.

"Those seeking evidence of an early end to the recession found no encouragement in February goods orders and shipments," Rahn said. "Durable-goods production should continue to drop for several months."

The 0.3 percent February drop followed declines of 1.5 percent in January and a huge 10.1 percent plunge in November. Orders were up 1.4 percent in December.

The decline was centered in a 10.6 percent plunge in demand for industrial machinery and equipment, a category that had shown a 10.5 percent increase in the previous month.

That weakness offset a 12.6 percent rise in orders for electronic and other electrical machinery and a 1.8 percent rise in demand for primary metals.

Orders for cars, airplanes and other items in the transportation sector showed a barely perceptible rise of 0.1 percent.

The key non-defense capital goods sector fell 1.7 percent in February following a 9.5 percent January drop. Analysts said weakness in this category was of special concern because it signals business investment plans and also reflects overseas demand for American capital goods, a sector that had been giving strength to the economy.

Orders in the volatile defense category climbed 1.8 percent in February following an even bigger 11.5 percent January increase.

Excluding defense, durable-goods orders would have fallen 0.4 percent in February after an even bigger 2.3 percent January decline.

The various changes left total durable-goods orders at a seasonally adjusted $118.91 billion in February compared to $119.27 billion in January. Commerce Department officials cautioned, however, that while the percentage changes were accurate, a data-processing error had inadvertently inflated all the dollar levels in the report.