Durable Goods Orders, Home Sales Increase
Orders for long-lasting manufactured goods posted their biggest rise in more than a year in May and home sales surged, reports showed Tuesday, indicating that the economy is struggling out of recession.
At the same time, the Conference Board, a private business research group, said consumer confidence rose slightly in June but remained at a level that suggests the economy is still weak.
The Commerce Department said orders for durable goods, items designed to last three years or more, increased 3.8% last month after a revised 3.6% April rise.
It was the biggest monthly increase in orders since a 7% pickup in March, 1990, before recession officially set in last July. Many economists believe that a mild recovery is under way.
The National Assn. of Manufacturers said demand must rise for orders to keep growing but added that sign are mounting that the recession was over or nearly over in May.
The National Assn. of Realtors said sales of existing homes rose a strong 6% in May to a seasonally adjusted annual rate of 3.51 million. It was the fourth consecutive monthly rise, boosting sales to the best pace in nearly 1 1/2 years, the industry group said.
Lower mortgage rates, which translate into lower monthly payments, lured more first-time buyers into the housing market, the realtors said.
The back-to-back gains in orders for durable goods supported claims by many economists and some policy-makers that the industrial sector is beginning to benefit from extremely lean inventories.
Federal Reserve Chairman Alan Greenspan has noted that low stocks of unsold goods means that there is a possibility of quick economic stimulus once consumer demand strengthens.
There were signs in the Conference Board report that consumers are growing more hopeful about the future, suggesting more spending ahead. The business association said its consumer confidence index rose in June to 78 from 76.4 in May, compared to a base of 100 in 1985.
“Despite consumer confidence moving up slightly in June, the index is still at a level that is historically associated with a sluggish economy,” said Fabian Linden, executive director of the group’s consumer research center.
Consumers are still heavily in debt from the 1980s and bank credit is tight, which restrains their ability to borrow and spend. Improved consumer confidence is critical because consumers account for two-thirds of U.S. economic activity through their purchases of goods and services.
Every major category shared in the increase except electronic equipment, where orders fell 2.6% last month after a 10.8% rise in April.
The Indicators ‘Big Ticket’ Orders Up Again Indicator: Orders in May for “big-ticket” durable goods, a barometer of manufacturers’ production plans.
What it did: Orders shot up 3.8% to a seasonally adjusted $120.5 billion, up from $116.1 billion in April. The Commerce Department said it was the second straight increase and the biggest gain in over a year.
What it means: Analysts say the report fits with the impression that the economy is recovering, though at a moderate pace.
Highlights: All major industries except electrical equipment posted gains.
Consumers Are
More Optimistic
Indicator: The June confidence survey, which monitors consumer expectations.
What it did: The Conference Board’s index rose to 78.0 in June from 76.4 in May. Of the 5,000 households surveyed nationwide, 28.3% predicted better business conditions in six months, compared to May’s 24.4%.
What it means: Analysts are buoyed by the public’s more positive view of things to come since consumer spending accounts for two-thirds of the gross national product.
Highlights: Concerned about the state of the economy, consumers continued to put major buying plans on hold.
Existing-Home
Sales Jump Indicator: May sales of previously owned single-family homes.
What it did: The National Assn. of Realtors said sales jumped 6% to a seasonally adjusted annual rate of 3.51 million.
What it means: Lower mortgage rates, which translate into lower monthly payments, lured more first-time buyers into the housing market, the realtors said.
Highlights: The May figure was the fourth consecutive monthly rise, boosting sales to the best pace in nearly 1 1/2 years, the industry group said.
Durable Goods New orders Billions of dollars, seasonally adjusted May, ‘91: $120.5 Source: Commerce Department
Consumer Confidence Index From a monthly survey of 5,000 U.S. households 1985 equals 100 1991 May*: 76.4 June**: 78.0 * Revised figure ** Preliminary figure Source: The Conference Board
Existing-Home Sales Seasonally adjusted annual rate, millions of units May, ‘91: 3.51 Source: National Assn. of Realtors
