Durable-goods orders up, new-home sales down in July
August 25, 2004
WASHINGTON (AP) – America’s factories saw orders for costly manufactured goods in July post the biggest gain in four months. New-homes sales, meanwhile, slid, according to a pair of reports that offered a mixed picture of economic activity.
The Commerce Department reported Wednesday that orders for durables goods – big-ticket items expected to last at least three years – rose by 1.7 percent in July from the previous month – lifted by stronger demand for goods including airplanes, machinery and communications equipment.
The increase – the largest since March – followed a 1.1 percent advance in June. The showing in July was stronger than the 1 percent rise that some economists were forecasting.
A second report from the department showed that sales of new homes declined by a sharp 6.4 percent in July from the previous month to a seasonally adjusted annual rate of 1.13 million units. The decline was steeper than analysts were expecting and left home sales at their lowest level since December.
Sales in June declined by 5.6 percent, according to revised figures, which showed sales were even weaker than previously reported.
The drop in home sales comes amid a sluggish jobs climate and high energy prices, which may have made some people wary of making a big financial commitment, analysts say.
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Even with the slowdown, economists believe the housing market – especially the larger market for previously owned homes – is still in decent shape.
President Bush is counting on the economy to come out of the rough patch experienced in the early summer by the time voters go to the polls in November.
Democratic rival John Kerry says the president’s economic policies, especially his tax cuts, are flawed – mostly helping the wealthy but squeezing the middle class. And, Bush’s policies also haven’t produced significant job creation, he argues.
The Federal Reserve, wanting to keep inflation under control, moved to boost interest rates on Aug. 10 by a quarter percentage point to 1.50 percent.
The Fed took the action even though Fed Chairman Alan Greenspan had acknowledged weeks before the Fed meeting that the economy had hit a “soft patch” in June.
In Wednesday’s manufacturing report, orders for all transportation equipment rose by 5.6 percent in July, the biggest gain since February, mostly reflecting stronger demand for airplanes. In June, transportation orders rose by 4.7 percent.
Excluding orders for transportation equipment, bookings for all other goods nudged up by 0.1 percent in July, an improvement from the 0.3 percent decline in June. Orders for machinery in July increased by 2.1 percent, up from a 1.1 percent rise the month before.
For communications equipment, orders rose by 5.1 percent in July, compared with a 4.4 percent drop in June. Orders for electrical equipment and household appliances increased by 5 percent in July, a turnaround from the 5.5 percent decline recorded for June.
Orders for non-defense capital goods jumped by 9 percent in July. That was the largest rise since July 2002 and followed a 1.1 percent advance in June. The category is watched closely by economists as an indication of businesses’ plans to boost spending on equipment and other goods to modernize.
There were some soft spots: orders for automobiles dropped by 5.3 percent in July, the largest decline in nearly a year. Orders for computers and fabricated metal products also showed declines.
In the housing report, new-home sales in July fell in every region except for the Midwest, where sales climbed to a new record annual rate of 260,000 units, representing a 21.5 percent jump from June’s level.
Sales declined by 23.5 percent in the Northeast to an annual rate of 62,000. In the South, sales dropped by 15.9 percent to a pace of 522,000 and in the West, they dipped by 1.7 percent to a rate of 290,000.