Durable-Goods Orders See 0.6% Decrease in July
Falling demand in July for long-lasting goods, such as business equipment, highlighted the U.S. factory sector’s woes, but buoyant home sales offered good news for the broader economy, reports showed Friday.
Amid declines in demand for computers, semiconductors and machinery, total U.S. durable- goods orders fell 0.6% in July, their second straight monthly drop, the Commerce Department said.
But a separate report from the department showed vibrant activity in the market for new, single-family homes. Sales of such homes shot up 4.9% to record their fastest annual rate since March.
“The dichotomy in this economy continues,” said David Seiders, chief economist at the National Assn. of Home Builders. “This is continuing this pattern of the housing sector performing very well, while the broader industrial sector is still in a contraction mode.”
The 0.6% drop in July durable-goods orders brought the value of new orders to $182.02 billion. In June, orders fell a downwardly revised 2.6%.
The overall July orders decrease matched the forecasts of U.S. economists in a Reuters survey. However, the closely watched category of non-transportation orders recorded a much steeper decline than expected, falling 1.4% compared with projections for a 0.6% drop.
“These data clearly indicate that U.S. manufacturing may not be quite at a bottom. The weakness is led by computers and electronic equipment, but other categories are weak also,” said Mary Webb, economist at Scotia Capital Markets in Toronto.
“I don’t think a sustainable recovery in manufacturing is imminent, contrary to some forecasters who expected one in the second half of 2001.”
Not all areas of the report were weak. Orders for motor vehicles and parts surged 3.8% in July, a positive sign for the key automobile sector.
But orders for several categories of business equipment recorded declines. Those include computers and related equipment, which sank 4.1% in July, and semiconductors, which plummeted 26%.
Machinery orders tumbled 3%. But there was a ray of hope in the communications equipment sector, which has seen big declines in recent months. Orders in that category jumped 18.3% in July.
Seiders of the home builders group said because home prices have held up while stock prices have slid, buyers are attracted to a home purchase as an investment.
“There are also solid underlying demographic trends that are supporting housing,” Seiders said.
Home sales logged an annual rate of 950,000 in July, the fastest pace since 953,000 in March.
Home sales in July were up in all regions. The Northeast saw the biggest jump, with an 18% gain. The West saw a 4.6% gain in sales, while the Midwest saw a 6.9% gain. Sales in the South rose 2.3%
The supply of new homes on the market fell to 3.8 months’ worth, from four months, also the lowest since March.
The median new-home price in July declined to $168,300 from $172,400, while the average sale price fell to $208,400 from $208,600. The price measures are not adjusted for seasonal variation.
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Durable Goods
New orders, in billions of dollars, seasonally adjusted:
Source: Commerce Department
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New-Home Sales
Seasonally adjusted annual rate, in thousands of units:
Source: Commerce Department
