Economic Signals Mixed, but Pointing Mostly Down : Indicators: Orders for durable goods orders slip, but so do first-time jobless claims.
Factory orders for expensive, long-lasting goods fell in June for the fourth time in five months, providing fresh evidence the economy is still sluggish.
But the government also said Thursday that there was a large decline in claims for jobless benefits last week, blurring the picture a bit.
On the eve of the government’s most comprehensive assessment of the economy, there were other signs of weakness--including a drop in consumer confidence and a slower pace of mortgage applications.
The Commerce Department said durable-goods orders slipped 0.1% last month after surging 2.6% in May.
Analysts, who had predicted a modest rise for June, said the Federal Reserve Board might feel more inclined to cut short-term interest rates again.
“The durable-goods report is telling you the factory sector is not out of the woods yet,” said Maury Harris, chief economist at PaineWebber Inc. in New York City. “The Federal Reserve knew what they were doing when they cut those rates and they may have to cut them more.”
Financial markets rallied, with the Dow Jones industrial average up 25.71 points to 4,732.77, near its record high, and the price of the 30-year Treasury bond gained moderately. The yield on the bond, which moves in the opposite direction of its price, was down slightly, to 6.85%.
The Labor Department said the number of American workers filing new claims for jobless benefits fell by 42,000 last week to a seasonally adjusted 374,000, down from 416,000 a week earlier. While the decline was encouraging, analysts noted that claims remain at a high level, pointing to softness in the job market.
In other economic news, an ABC-Money magazine survey said consumer confidence sank to a nine-month low and a trade group said mortgage applications fell 4.4% last week.
“The economy has a bit of an irregular heartbeat. But there does seem to be life and forward movement,” said Robert Brusca of Nikko Securities International in New York. “Everything suggests we’re not crashing. We just hit an air pocket.”
The Federal Reserve, after a string of seven interest rate increases, reversed course this month and cut a key rate for the first time in nearly three years. The federal funds rate that banks charge each other for overnight loans was lowered a quarter point to 5.75%.
The decline in durable-goods orders, which includes such items as cars, computers and appliances, was led by a 2.6% drop for electronic equipment. There was also sharply falling demand for aircraft, a particularly volatile category.
Orders for durable goods totaled a seasonally adjusted $159.4 billion in June, down from $159.6 billion.
Falling orders for defense equipment contributed to the decline, slipping 1.4% in June after soaring 7.4%. Excluding military goods, orders were unchanged last month.
Orders for non-defense capital goods excluding aircraft--a key indicator of business expansion plans--rose 2.5% in June on top of a 5% gain the previous month.
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Durable Goods
New orders, in billions of dollars, seasonally adjusted:
June 1995: $195.4
Source: Commerce Department
