Durable Goods Fall; Incomes Up Slightly
Orders to U.S. factories for “big-ticket” durable goods dropped 0.8% in August, continuing the flat performance that has gone on for 18 months, the government said today.
In a separate report, the Commerce Department said personal incomes advanced just 0.3% in August, the slowest pace in four months, while consumer spending rose 0.5%, the lowest in three months.
The department reported that orders for durable goods--items expected to last more than three years--totaled a seasonally adjusted $127 billion following a revised 2.7% gain in July.
But excluding defense and transportation, overall orders would have fallen more. Without either category, orders would have dropped 1.6%, the department said.
“These numbers pretty much show that the economy has few vital signs left,” said Jean Sundrla, an analyst at Evans Economics in Washington. “The new orders in defense did really save the day for the report.
“Sustained weakness in durable goods usually precedes a recession and right now the economy is very vulnerable.”
In Chicago, Robert Dieli, an economist at Northern Trust, called the report “a trifle weak” but not enough to “make you say ‘It’s time to head to the storm cellar.’ ”
Orders in the key category of non-defense capital goods, often a barometer of business plans to expand and modernize, plunged 11.2% to $35.4 billion after gaining 10.1% in July. Excluding aircraft orders, the drop would have been only 4.4%.
The often-volatile defense category jumped 12.4% to $8.4 billion, following a 5.6% decline in July.
Dieli said he “wouldn’t tie a great deal of” the military spending to the Persian Gulf crisis, but added that there’s “no doubt” some of it was reflected in the latest data. He also said he expects more crisis-related military spending “down the road.”
A market letter by Fuji Securities in Chicago noted: “Durable goods orders have chopped back and forth over a year and a half without achieving any significant net growth.”
In its other report, the government said personal incomes totaled a seasonally adjusted annual rate of $4.68 trillion, a $13-billion increase over July. It was the smallest increase since a 0.2% gain last April.
At the same time, the department said spending totaled $3.69 trillion, up $16.7 billion from a month earlier. It was the smallest advance since last May, when spending was unchanged from the previous month.
Nevertheless, consumer spending in August topped the 0.2% gain at an annual rate posted in the second quarter gross national product.
Consumer spending is considered a barometer of economic health since it accounts for about two-thirds of the nation’s economic activity.
