Orders for big-ticket manufactured goods rose modestly in December while new-home sales surged, but worries about jobs and war weighed on consumer spirits for a second straight month in January, reports said Tuesday.
The Commerce Department said orders for durable goods such as civilian aircraft and machinery edged up 0.2% in December, boosted by defense spending as war clouds gather over the Persian Gulf. But that was less than the 0.9% gain economists had expected. Excluding defense, orders fell 0.2%, pointing to subdued business investment ahead.
“For the economy, the war issue needs to be settled,” said John Silvia, chief economist at Wachovia Securities in Charlotte, N.C. “Businesses are rational ... and they have put both hiring and business investment on hold until the war [and] terrorism risk has passed.”
Although borrowing costs at four-decade lows have done little to spur business spending, low interest rates have spurred a red-hot housing boom. New-home sales surged 3.5% in December to a 1.08-million-unit rate, easily beating forecasts, the Commerce Department said.
A third report, from the Conference Board, a private research group, showed its closely watched consumer confidence index fell to a nine-year low of 79 in January from a revised 80.7 in December as joblessness and war fears depressed consumers’ outlook on the economy over the next six months.
Although consumer confidence has fallen for seven of the last eight months, the drop was more moderate than the consensus forecast of a 78.1 reading, and consumers’ assessment of their present situation improved a bit during the month.
The meager December gain in durable goods orders followed a revised drop of 1.3% the previous month and had many economists talking about weak gross domestic product growth in the fourth quarter, probably below 1%.
Non-defense capital goods orders excluding aircraft, viewed as a proxy for business capital spending, fell 0.1% after a 3.1% plunge in November, bolstering the view that companies are holding off their spending. A collapse in spending on plants and equipment, which boomed in the 1990s, led the economy into recession in 2001. A turnaround is crucial for a sound recovery.
In a bright spot for the battered technology sector, orders for computer equipment rose 3.2%, the largest rise since July. While orders for computers and related products surged, communications equipment orders sank.
Housing has been one of the few bright spots in the dismal U.S. economic picture as low mortgage rates, coupled with slumping stock markets and steadily rising home values, have drawn many Americans to invest in houses and apartments.
Sales of newly built homes in 2002 totaled 976,000, the highest since the Commerce Department began keeping the statistics in 1963.