By MARTIN CRUTSINGER, AP Economics Writer
Updated 9:25 am, Monday, January 28, 2013
WASHINGTON (AP) — U.S. demand for long-lasting manufactured goods rose sharply in December on strong gains in volatile aircraft orders. But companies slowed their orders of goods that signal investment plans, indicating manufacturing could stay choppy in 2013.
The Commerce Department said Monday that overall orders for durable goods increased 4.6 percent in December compared with November. The gains were led by a 56.4 percent increase in military aircraft orders and a 10.1 percent increase in commercial aircraft orders.
Orders rose in other major categories, including machinery, communications equipment and primary metals.
A more closely watched gauge of business investment plans increased just 0.2 percent. Economists were encouraged that orders for so-called capital goods kept rising in December after gains of 3 percent in both November and October.
1. Hurray for the military industrial complex or as Paul Krugman wrote
This may seem hard to believe. The New Deal famously placed millions of Americans on the public payroll via the Works Progress Administration and the Civilian Conservation Corps. To this day we drive on W.P.A.-built roads and send our children to W.P.A.-built schools. Didn’t all these public works amount to a major fiscal stimulus?
Well, it wasn’t as major as you might think. The effects of federal public works spending were largely offset by other factors, notably a large tax increase, enacted by Herbert Hoover, whose full effects weren’t felt until his successor took office. Also, expansionary policy at the federal level was undercut by spending cuts and tax increases at the state and local level. (snip)
What saved the economy, and the New Deal, was the enormous public works project known as World War II, which finally provided a fiscal stimulus adequate to the economy’s needs.
This history offers important lessons for the incoming administration.