Factory Orders and Existing-Home Sales Drop : Economy: The August figures cause concern because the two sectors were supposed to be leading the country out of recession.
Factory orders for durable goods and sales of existing homes fell in August, according to reports Wednesday that raised concern about the sectors that had been seen as leading the economy out of recession.
The Commerce Department said durable goods orders fell 3.8% last month to a seasonally adjusted $124.5 billion.
The August drop followed a revised 11.7% surge in July--the strongest since records began being kept 33 years ago--and was a less severe fallback than Wall Street economists predicted.
But the downturn showed that the industrial sector, one of the strongest areas of the economy, has been on an uneven path to recovery from the recession that began in July, 1990.
White House chief economist Michael J. Boskin said that, despite the August drop, orders showed “a solid gain” over June levels and thus the trend was positive.
Boskin said the gross national product was growing at a 2% to 3% annual rate in the third quarter, in line with the Bush Administration’s forecast but smaller than the White House preferred. Not everyone was that optimistic.
“We have severe doubts about whether the surge in manufacturing can be sustained, given the drop in consumer confidence and the weakness in domestic automobile sales,” said economist Jack Albertine of Washington-based Albertine Enterprises Inc.
The Conference Board, a New York-based business group, reported Tuesday that consumer confidence dipped in September to its lowest level since the Gulf War, when the economy was in the trough of recession.
In a further sign of a troubled rebound, auto makers said Tuesday that car sales fell a sharp 16% in the mid-September period.
Boskin conceded that “we will have to see an improvement in the consumer sector because that accounts for two-thirds of GNP.”
In a second report, the National Assn. of Realtors said sales of existing single-family homes fell 2.1% in August to a seasonally adjusted annual rate of 3.25 million, down from 3.32 million in July.
The report also showed that sales in July actually plunged 7.5%, steeper than the 6.7% decline first reported last month. New-home sales also fell in July, according to government figures.
Until July, sales of new and existing homes had risen every month since the housing recession bottomed out last January.
The main reason for the fall in August orders for durable goods--those expected to last three years or more--was a 9.2% drop in demand for transportation goods after a big 27.1% jump in July. Last month’s fall and July’s surge both were concentrated in demand for expensive commercial aircraft.
Every other category of goods except industrial machinery fell in August. That category was flat after a 1.9% increase in July.
Electronic goods orders fell 7.9% after a 14.3% July rise, and primary metals were down 0.7% after a 6.5% gain.
Non-defense capital goods orders excluding aircraft also fell, down 2.7% to $24.8 billion, after advancing 5.0% a month earlier. This category often is a measure of business confidence and plans to expand and modernize.
Lynn Reaser, an economist with First Interstate Bancorp in Los Angeles, said the August orders falloff was primarily a return to a more normal level of business.
Reaser noted that shipments rose 1.2% last month after a 0.6% July gain, while the backlog of unfilled orders went up 0.3% after a 1.6% July gain.
“It’s a bit of a reversal of that jump in July, and it is not a sign recovery is ending but rather an adjustment in the big July increase,” Reaser said.
Existing Home Sales Seasonally adjusted annual rate, millions of units Aug., ’91: 3.25 July., ’91: 3.32 Aug., ’90: 3.41 Source: National Assn. of Realtors
Durable Goods New orders in billions of dollars, seasonally adjusted Aug., ’91: 125.9 July., ’91: 130.8 Aug., ’90: 129.0 Source: Commerce Department