Home Sales, Goods Orders Decline

Orders for big-ticket durable goods and sales of existing homes both fell in June, but analysts said Thursday that it is too early to tell whether the anticipated economic slowdown has started.

“The numbers show some signs of a slowing in the economy, but it still seems to be doing well,” said economist Lynn Reaser of Barnett Banks Inc. in Jacksonville, Fla.

The declines were from record highs, she said, and a big drop in initial claims for jobless benefits, also reported Thursday, suggest “an economy that still may be growing above the speed limit.”

Federal Reserve Board Chairman Alan Greenspan and other economists are predicting the economy will slow in the second half of the year. But Greenspan told Congress earlier this week that although he expects moderation, it is uncertain when the change will happen.

Although he agreed it is too early to say the slowdown has begun, economist Richard Berner of the Mellon Bank in Pittsburgh said “the data certainly brought a smile to the financial markets this morning.”

The stock market continued a two-day rebound, buoyed also by an encouraging profit report from IBM. The Dow Jones industrial average rose 67.32 points to 5,422.01. But bonds retreated in the afternoon with investors remaining somewhat hesitant before next week’s barrage of economic data.

Investors believe a moderating economy will forestall any Fed move to raise interest rates in an attempt to head off any inflationary spiral.

In its report, the National Assn. of Realtors said sales of previously owned homes fell 2.3% in June, to 4.18 million at a seasonally adjusted annual rate.

The decline, the first since January, came as mortgage rates reached the highest level in more than a year.

Sales in May shot up to a record 4.28 million rate. Sales rose only in the South in June, although they were unchanged in the Northeast.

The decline could be a harbinger of a slower economy because of the ripple effect on related areas such as appliances, building materials and home furnishings, Reaser said.

“But at a level of 4.18 million, the housing industry is still very healthy,” she said. Sales totaled only 3.80 million in 1995.

The Commerce Department reported that factory orders for durable goods slipped 0.8% to a seasonally adjusted $169.1 billion in June, from a record $170.4 billion a month earlier.

The 4.2% jump in May--steepest in nine months--was propelled by a huge surge in aircraft orders that helped push the volatile transportation category up 14.9%. But analysts said the advance could not be sustained.

Indeed, transportation tickets fell 1.3% in June, dampened by large declines in both aircraft and automobiles. But the overall drop was widespread.

Excluding transportation, orders were off 0.6%, the first decline since March. Orders for electronic and other electrical equipment posted the only increase among the major categories.

Still, the backlog of unfilled orders rose 0.7%, the ninth increase in the last 10 months. A growing backlog suggests businesses may require additional production facilities and manpower to meet demand.

Durable goods, items expected to last more than three years, are considered a key gauge of the health of the nation’s manufacturing sector.

The Labor Department also reported Thursday that first-time claims for jobless benefits fell by 45,000 last week to 322,000, lowest in six months. But it attributed much of the drop to the return of workers temporarily laid off while the automobile industry retooled production lines for 1997 models.

The closely watched and less-volatile four-week moving average of new claims fell by 8,000 to 352,500, lowest since early June.