NEWS AND COMMENTARY
November 28, 2000 
Durable-Goods Orders Drop Sharply in October
By The Associated Press
Earnings Growth Will Continue To Sputter ... Weiss comments
WASHINGTON - Orders to American factories for big-ticket manufactured goods fell a sharp 5.5% in October as demand for primary metals including steel dropped by the largest amount in nearly two years.
The Commerce Department said Tuesday that last month's decline in orders for durable goods, items expected to last three or more years, was the first since a 13.2% decrease last July. Orders had risen by 2.4% in September.
The $12.1 billion decrease pushed total durable-goods orders down to $209 billion for the month and represented the latest evidence that economic activity is still slowing in reaction to a string of interest rate increases by the Federal Reserve.
The central bank has been pushing rates higher since July 1999 in an effort to dampen growth and keep inflation under control.
The 5.5% decline in durable-goods orders last month was more than double the 2.1% drop that private economists had been expecting.
This news is a wake-up call telling investors at large what we've warned you for months: There is no soft landing, so put on your crash helmets!
Such a huge drop in durable-goods orders will undoubtedly cripple company earnings. Earnings growth is already slowing in most industries, especially tech companies, and a decrease in durable-goods orders will only add to company woes.
Plus, weak sales in durable goods does not mean that the Fed will cut rates. The Fed is still concerned with inflation pressures from oil prices and the tight labor market. Furthermore, the slowdown in orders for durable goods means that fewer businesses are investing in equipment that will add to productivity growth. As productivity growth declines, it will no longer be able to offset the inflationary pressures that have been creeping into the economy.
The fourth quarter and first quarter of next year will bring more earnings disappointments and stocks will continue to tumble. Today's economic news confirms that the worst is still to come.
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