|
U.S. orders, home sales fall
|
 |
October 25, 2001: 10:37 a.m. ET
Demand for long-lasting products, existing homes lower than analysts expected.
|
NEW YORK (CNNmoney) - Orders for long-lasting goods such as cars, computers and appliances tumbled last month, the government said Thursday, while sales of existing homes also fell, signs of the impact last month's terrorist attacks had on the world's largest economy.
The Commerce Department said orders for durable goods -- items meant to last at least three years -- sank 8.5 percent in September to $165.4 billion after falling a revised 0.5 percent in August. Economists surveyed by Briefing.com expected durables orders to fall only 1.0 percent.
Separately, the National Association of Realtors reported existing home sales fell 11.7 percent in September to an annual rate of 4.89 million units, a decline attributable primarily to the after-effects of the Sept. 11 attacks. Economists surveyed by Briefing.com expected existing home sales at a rate of 5.2 million units.
The durable goods data typically are quite volatile, especially when taking into account transportation products. Even without those products, however, durable goods orders fell 5.5 percent. The level of total orders is the lowest since August 1996.
"It definitely is a weak number and is symptomatic of how weak this economy really is," Bob McIntosh, chief economist at Eaton Vance Management, told CNNfn's Before Hours program. "I think this tells us the slowdown accelerated a little more than we expected."
Meanwhile, the Labor Department said its Employment Cost Index, which measures workers' wages and salaries and is closely watched for signs of inflation, rose 1.0 percent in the third quarter after rising 0.9 percent in the second quarter. Economists surveyed by Briefing.com expected ECI to rise 0.9 percent.
"This number will be overlooked," McIntosh said. "The issue is not inflation. If anything, it's deflation because the economy is just so weak."
Separately, new claims for state unemployment benefits rose by 8,000 to 504,000 last week, versus forecasts for 500,000.
U.S. stocks opened sharply lower after the news, while Treasury bond prices rose.
Click here for CNNmoney.com's economic calendar
A year-long slowdown in the U.S. economy, the brunt of which was borne by the manufacturing sector, took a turn for the worse after last month's attacks. Most economists expect the economy to fall into a recession in the second half of the year.
"Clearly, all of the numbers put together confirm the overall economic environment is becoming quite dismal,' said Anthony Karydakis, senior financial economist at Banc One Capital Markets.
In a bid to keep consumers spending and ease the downturn, the Federal Reserve has cut its target for short-term interest rates nine times this year and is expected to do so again when its policy makers meet Nov. 6.
President Bush and Congress also are trying to put together a package of tax cuts and spending measures to stimulate the economy. On Wednesday, the House of Representatives passed a controversial $100 billion package focusing on tax cuts for corporations, while the Senate is expected to take a somewhat different approach.
Both the Fed and the government seek to ease the pain of hundreds of thousands of job cuts, which were mounting even before the Sept. 11 attacks and have accelerated since.
The four-week moving average of new unemployment claims, which smoothes out fluctuations in the weekly data, rose 12,000 to 505,000, the highest level since March 1991, at the end of the last recession.
And workers are having a hard time finding new jobs, as indicated by the rise in the number of continued claims for the week ended Oct. 13, the most recent data available, to 3.65 million, the highest level in more than 18 years.
"Payroll employment for October will plunge sharply and unemployment will continue to rise, likely breaching 6 percent by early next year," FinancialOxygen economist Steven Wood said.
Consumer confidence was eroded even more in September by the terrorist attacks, and many consumers spent the first week after the attacks doing little but watching television and buying only necessities. Few, apparently, were interested in buying new cars or other big-ticket items.
Orders for transportation products fell $8.2 billion, or 15.9 percent, to $43.5 billion, the Commerce Department said. Orders for computers and electronic products fell 9.1 percent to $29.2 billion.
Click here to find a mortgage
People also were less interested in buying houses, according to the National Association of Realtors.
"Considering the nation essentially came to a halt during the week of the attack, we knew there would be a hit on home sales activity," NAR chief economist Dr. David Lereah said.
A slowdown in home sales is alarming at first glance because, before Sept. 11, the housing market and consumer spending were the last pillars of strength in an economy being dragged down by a slowdown in business spending and a recession in manufacturing.
Still, while consumer confidence may have been set back by the attacks, most observers don't expect the housing market to implode, especially with mortgage rates staying persistently low. NAR said it expects total sales for 2001 of 5.19 million -- an increase of 1.3 percent from 2000 -- which would be the second-highest total for existing home sales on record.
"Our in-house tracking of major brokers across the country shows sales activity making some recovery," Lereah said, "which demonstrates that the underlying demand and fundamentals of the market remain strong." 
- from staff and wire reports
|
|
|
|
|
 |
|
