Orders For Durable Goods Fuel Concerns Jump Increases Odds That Fed Will Boost Interest Rates Again To Slow Economy

Orders to U.S. factories for big-ticket durable goods posted a larger-than-expected gain in April, renewing concerns that more interest rate hikes may be needed to keep the economy from overheating.

“The general drift is clearly to the upside,” contended economist Stephen S. Roach of Morgan Stanley & Co. in New York. “That’s consistent with lot of other indications that we’re getting … that growth remains extremely solid in the U.S. economy.”

Orders increased 1.4 percent to a seasonally adjusted $175.6 billion, up from $173.2 billion in March and the third advance in four months, the Commerce Department said Wednesday. The gain was larger than the 1 percent increase that many analysts had predicted.

At the same time, the department said the 2.2 percent March decline was not as steep as the 2.6 percent drop it previously estimated.

Orders for durable goods - items like appliances and aircraft that are expected to last more than three years - are a key gauge of the nation’s manufacturing strength.

The stronger data contrasted with other recent signs that economic activity may be slowing enough to keep inflationary pressures under control without the Federal Reserve having to boost interest rates again.

After nudging a key short-term rate up a quarter-percentage point in March - the first increase in two years - Fed policy-makers left it unchanged at 5.5 percent at their latest meeting last week.

But, Roach said, “as the economy continues to firm up, they will have no choice but to tighten and may come to regret not moving in May.”

The manufacturing economy “tends to take its cue from the consumer sector,” he explained. “Given the surge in consumer confidence and incomes, I fully expect there will be further increases in durable goods orders and manufacturing production. This is just a hint of more growth to come.”