Factory Orders Down, Home Sales Up

(AP) Orders to U.S. factories for big-ticket durable goods plunged 5.9 percent in September, the biggest... Full Image

WASHINGTON (AP) - Orders to U.S. factories for big-ticket durable goods plunged 5.9 percent in September, the biggest decline in 10 months, the government reported Friday, providing further evidence that the economy is struggling to mount a sustainable recovery from last year's recession.

The Commerce Department said that the drop in demand for durable goods, manufactured products expected to last three or more years, was the third decline in the past four months and reflected widespread weakness throughout American manufacturing with orders down for everything from cars to communications equipment.

The drop in orders was much sharper than the 2 percent decline that many economists had been expecting.

With less than two weeks before Americans are scheduled to go to the polls to decide which party will control Congress, Democrats have gone on the attack, hoping to use the uncertain economic recovery to their advantage against Republicans in close House and Senate races.

House Democratic Leader Richard Gephardt, D-Mo., said on Thursday that "the economy is stuck in neutral if not falling, and we could be headed for a double-dip recession."

President Bush, who has kept attention throughout much of the campaign season on a possible war with Iraq, has been on the campaign trail this week, defending the way his administration has dealt with the country's first recession in a decade and promising to do more if necessary to keep the economy out of another recession.

The report on durable goods followed news this week that the Index of Leading Economic Indicators fell for the fourth straight month, something that hasn't happened since a similar string of declines before the 1990-91 recession, which contributed to the defeat of Bush's father.

However, some sectors of the economy are doing well. Two new reports Friday showed that sales of new homes rose by 0.4 percent in September to a record annual rate of 1.021 million. Sales of existing homes were also up last month, increasing 1.9 percvent to an annual rate of 5.40 million units, according to a report from the National Association of Realtors.

Both new and existing home sales are on track to set new records this year, a boom that has been spurred by the lowest mortgage rates in decades.

(AP) Consumer prices rose a moderate 0.2 percent in September despite the biggest jump in energy costs... Full Image

Still, the overall economy is being held back by a number of factors including a plunging stock market and rising consumer anxiety, fed by concerns over what a possible war in Iraq will do to energy prices.

The 5.9 percent drop in orders for durable goods in September followed a 0.6 percent decline in August and a 4.5 percent drop in June. Only July posted an increase during this period, a gain of 8.5 percent.

American manufacturers have been the hardest hit by the recession, with employment in this sector dropping for more than two years as companies have been forced to lay off more than 1 million workers in the face of falling demand.

The Federal Reserve reported in its latest nationwide survey of business conditions on Wednesday that manufacturing activity had weakened over the past two months. Many economists believe the Fed will cut interest rates when they meet again on Nov. 6.

The Fed has kept a key interest rate at a 40-year low of 1.75 percent since last December, a level which has spurred the boom in home sales and auto sales.

(AP) Housing construction rebounded with gusto in September, soaring by 13.3 percent to the highest... Full Image

While these two sectors have been doing, analysts are worried that other parts of the economy need to start doing better to take up the slack when consumer demand for cars and homes starts to flag.

The orders report showed that orders for cars, trucks and other transportation products dropped by 16.1 percent. Excluding this volatile sector, orders were still down by 1 percent.

Weakness in other industries included a big 52 percent decline in demand for communications equipment, a sector that has suffered from the collapse of the Internet stock market bubble.

Orders for non-defense capital goods dropped by 12.6 percent, a bad sign for hopes that this key sector of the economy is about to stage a rebound, while orders for defense equipment, which have been strong reflecting the government's big buildup in this area, fell by 4.1 percent.

1.02 million new home sales, plus 5.4 million existing home sales for the month--annual rate of 77 million homes.

How many homes do we have, total, in this country? Sales at this rate (77 million) sounds like an absurdly high number.

Annualized, that means one house would be sold for every 3-4 people, children included, in a single year. Since home ownership is somewhere about 68% of the households, I don't think these numbers add up.

Either the figure is bogus, or the housing boom is totally unsustainable and about to crash, just as the doomsayers have been warning.

no, you simply mis-understood the numbers. They measure the numbers monthly, but then they 'annualize' them and then report the 'annual' number. So the 1 million new single family homes constructed and the 5.77 million existing homes sold are annual numbers. They track this number every month.

I don't know how these numbers relate to the numbers in the above referenced article,but prior to the collapse of the stock market in 2002 and even more so now many people are putting their investment in real estate and building spec houses, especially in Florida where construction is at an all time high.

I'm aware of one entity that has 2 multi-million dollar spec houses under construction and another entity that also has two spec houses under construction for an estimated total value $8/9 million dollars.

In addition to many construction companies not only building homes for their customers but also investing in spec houses.

What I'm suggesting is that maybe you have a large number of not only wealthy, but middle class individuals that own their primary residence in addition to other spec houses that may be skewing these figures somewhat.

I know around here the only reason people are buying homes is the very low interest rates AND because the government is providing a lot of money and help for people who couldn't buy homes normally to get them. People with no credit, people making $8 an hour, especially so-called minorities. Some of these people may be able to hang on to their new homes, some are excited about being homeowners for the first time ----but many will not be able to follow through with their mortgages ---and not the taxes either.

This is going to end badly for many. If you think the S&L bailout was big wait until housing prices crash and all those now house poor folks with negative equity start defaulting. No one wants to pay a three hundred thousand dollar mortgage on a house that is now worth only two hundred thou.

I don't think they're counting re-financing as a sale of existing home.

Also, I think the article is incorrect in implying that the 1.077? million annualized rate of newly built single family homes being a record. I know for a fact that around 1980 we built 2.2 million units of housing. I thought about 1.3 or 1.4 million were single family, the rest were apartments/condos. We're considerably under those numbers now.

The number I would like to see is the amount of debt we are carrying. With the lower perceived interest rate and weakened job/earnings market we are all probably leveraged to record levels, and that makes the whole stack extremely unstable.

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