Durable Goods Orders, Home Sales Decline
The government reported Tuesday that orders for “big ticket” durable goods plunged 4.1% in September, but economists are reluctant to conclude that the red-hot manufacturing boom is ending.
In a separate report, the National Assn. of Realtors said sales of existing single-family homes fell 2.2% in September. It was only the second decline since January.
The Commerce Department said total orders fell $5 billion to a seasonally adjusted $117.7 billion last month, pulled down by dramatic declines in the volatile defense and transportation sectors.
Other categories, including machinery, computers and capital goods purchased by businesses, also fell.
The latest report fits in with other signs of a slowdown last month, including the second consecutive decline in retail sales and a drop in manufacturing employment.
But analysts said it was too soon to declare that manufacturing, which has driven robust economic growth this year, is slowing significantly.
A boom in export sales, fueled by the lower value of the dollar, has kept factories humming. Manufacturers in turn have invested heavily to expand the capacity of their plants, spurring the fastest growth in capital spending since 1984.
“There are some cautionary notes in this report, but even so the economy is still very strong. The manufacturing sector isn’t faltering just because orders went down one month,” said Bruce Steinberg, an economist with Merrill Lynch in New York.
Excluding defense, orders fell 3.5% in September. Excluding transportation, orders were down 1.7%.
The key category of non-defense capital goods, considered a good barometer for business expansion plans, fell 11.9%. It was the first decline since May and the steepest retreat since January, 1986.
In its sales report, the National Assn. of Realtors said sales of existing homes declined to a seasonally adjusted annual rate of 3.63 million units last month, following a 2.2% increase in August.
But last month’s level was still higher than most economists would have predicted this spring, when mortgage interest rates began to creep higher.
Fixed-rate mortgages on average hit a low of 9.84% in February and rose to 10.71% by early August. Since then, they have eased back to 10.28%, but many analysts expect them to start rising again by year-end.
Existing-home sales in the late spring and early summer were strong, in part because many buyers apparently purchased homes sooner than planned in an attempt to beat rising interest rates.
“The decline . . . in September is a hangover from the buying spree of the summer,” said John A. Tuccillo, chief economist of the association. “The extraordinary increase” of the summer was “in part borrowed from September.”
The West was the only region of the nation showing an increase of sales last month. They rose 6% to an annual rate of 710,000 units, the highest level since December, 1986, following a 3.1% increase in August.
John Savacool, an economist with WEFA Group, a forecasting firm in Bala-Cynwyd, Pa., said California’s strong economy and growing population are supporting the housing market.