Economy Sputters, New Report Shows

Orders to factories for big-ticket items such as cars andcomputers suffered the worst drop in 15 months in March, thegovernment reported Friday.

"The economy's doing the hesitation waltz again," Northern Trusteconomist Robert G. Dederick said.

March durable goods orders fell 3.7 percent to a seasonallyadjusted $130 billion, the sharpest decrease since December, 1991,the Commerce Department reported.

That fits with other evidence that the economy is losingmomentum after a surge late last year, Dederick said. Chicago-arearetailers have been discounting more goods, trying to drum up salesbecause consumers have gotten skittish. New-home sales have beensluggish as have employment reports.

"This is still an expansion that doesn't have all the cylindersfiring," Dederick said. "We still don't have the process going wherestrength begets strength begets more strength."

Even so, the economy keeps chugging along, said Diane Swonk,regional economist for First National Bank of Chicago. Even with thelatest setback, March durable-goods orders were 6.3 percent higherthan a year ago.

And unusual weather - including a snowstorm that crippled theEast and South - gets some of the blame for sluggish economicreports.

Even so, consumers are pulling back because they got overlyoptimistic late last year and overcommitted themselves at Christmas,Swonk said. "Reality shock" hit as consumers realized "the world isnot that much different than we were in 1992," said.

She did cite two hopeful signs for the local economy: A 44 percent growth in heavy truck production over the last quarter. An expected pickup in housing starts after a wet and muddy firstquarter.

And Swonk expects to see 2.8 percent first-quarter growth inthe Gross Domestic Product when the government report is releasednext week, though only a 2 percent growth for the second quarter.

Robert Genetski, head of the Chicago economic forecasting firmthat bears his name, shrugged off the bad news. He believes theeconomy is going along at a reasonably good pace.

Yet Genetski says there are dark clouds on the horizon in the form of President Clinton'stax-increase proposals. Unlike the president's job-stimulus package,the tax plans are likely to pass Congress because enough Republicansbelieve the country needs them. He also believes another negativewould be imposition of new taxes for Clinton's health-care package.

In another negative sign, factories reported their backlog ofunfilled orders fell 1.1 percent to a seasonally adjusted $447.4billion, the first decline since November.

Every category of orders was down in March, except defenseorders which rose 6.5 percent to a seasonally adjusted $6.8 billion.

Contributing: Associated Press