US durable goods orders slide
US durable goods orders slide
By Daniel Pimlott in New York
Copyright The Financial Times Limited 2007
Published: February 27 2007 15:17 | Last updated: February 27 2007 15:17
New orders for manufactured goods plummeted in January, raising concerns about the underlying strength of the economy. Meanwhile, sales of existing homes rose by 3 per cent last month, the biggest rise in two years, as the warm winter encouraged home buyers to spend.
Data published by the commerce department on the manufacturing industry on Tuesday showed that orders for durable goods fell by much more than expected last month, suggesting that the downturn in the manufacturing sector is not yet over.
New orders for durable goods plunged 7.8 per cent to $203.9bn in January, the largest fall on record. Excluding volatile transportation orders, which reflect numbers for aircraft, durable goods orders fell by 3.1 per cent, the biggest drop since July 2005.
Orders were dragged down in particular by plummeting aircraft orders, which fell 59 per cent, and a 5.1 per cent drop for motor vehicles and parts.
Economists had forecast a fall of 2.5 per cent, or 0.2 per cent excluding transportation.
“This is a big deal as far as the industrial sector goes,” said Paul Ashworth, senior economist at Capital Economics. “Although its no secret that large parts of the industrial sector such as the motor industry are suffering. But its not disastrous.”
The disappointing figures come after two months of rising orders, including growth of 2.8 per cent in December, a figure which was downwardly revised from 3.1 per cent.
A widely-watched gauge of business investment - non-defence capital goods orders excluding aircraft - fell 6 per cent over the month and is down 9.3 per cent on a three-month annualised basis.
“The fact that it has dropped for the last four months ... suggests that manufacturing and investment activity is slowing markedly,” said James Knightley, an analyst at ING Bank NV.
In the housing market, sales were boosted by warm winter weather, and may slip back after the severe snowstorms in late January and February, economists said.
Sales of existing homes rise to 6.46m in January from 6.27m the month before, according to data from the National Association of Realtors. But the median price of a home fell by 3.1 per cent to $210,600 from the same period last year.
The strong rise in home sales surprised economists, who had expected only a slight increase to 6.24 - 6.3m in January. Sales were still 4.3 per cent down on last year, however.
The housing figures may add to the Fed’s concerns that a strengthening economy could put pressure on inflation, but weak durable goods orders seemed likely to balance that out, according to analysts.
“Today’s figures are consistent with a steady Fed stance,” said Nick Bennenbroek, a senior currency strategist at Brown Brothers Harriman. “Signs of consumer sturdiness and hints of housing stabilization are an offset to manufacturing weakness.”
Pat Combs, president of NAR, said he saw the housing market stabilising. “The market is trending up from its low last fall,” he said.
The strongest performance was in the west, where sales rose 5.6 per cent, while they rose 4.8 per cent in the midwest.
The data suggested an overall negative view of the state of the economy, analysts said.
“I think the Fed view will be largely negative,” said Mr Ashworth. “The weakness in durable goods was very disappointing, and the strength in existing home sales was responding to a temporary blip we already knew about.”
Existing home sales can be a lagging indicator for housing, because they only register sales at the end of the process of buying a house. Other recent housing data on the number of new houses that builders started in January was down sharply. Figures on new home sales are due out on Wednesday.
By Daniel Pimlott in New York
Copyright The Financial Times Limited 2007
Published: February 27 2007 15:17 | Last updated: February 27 2007 15:17
New orders for manufactured goods plummeted in January, raising concerns about the underlying strength of the economy. Meanwhile, sales of existing homes rose by 3 per cent last month, the biggest rise in two years, as the warm winter encouraged home buyers to spend.
Data published by the commerce department on the manufacturing industry on Tuesday showed that orders for durable goods fell by much more than expected last month, suggesting that the downturn in the manufacturing sector is not yet over.
New orders for durable goods plunged 7.8 per cent to $203.9bn in January, the largest fall on record. Excluding volatile transportation orders, which reflect numbers for aircraft, durable goods orders fell by 3.1 per cent, the biggest drop since July 2005.
Orders were dragged down in particular by plummeting aircraft orders, which fell 59 per cent, and a 5.1 per cent drop for motor vehicles and parts.
Economists had forecast a fall of 2.5 per cent, or 0.2 per cent excluding transportation.
“This is a big deal as far as the industrial sector goes,” said Paul Ashworth, senior economist at Capital Economics. “Although its no secret that large parts of the industrial sector such as the motor industry are suffering. But its not disastrous.”
The disappointing figures come after two months of rising orders, including growth of 2.8 per cent in December, a figure which was downwardly revised from 3.1 per cent.
A widely-watched gauge of business investment - non-defence capital goods orders excluding aircraft - fell 6 per cent over the month and is down 9.3 per cent on a three-month annualised basis.
“The fact that it has dropped for the last four months ... suggests that manufacturing and investment activity is slowing markedly,” said James Knightley, an analyst at ING Bank NV.
In the housing market, sales were boosted by warm winter weather, and may slip back after the severe snowstorms in late January and February, economists said.
Sales of existing homes rise to 6.46m in January from 6.27m the month before, according to data from the National Association of Realtors. But the median price of a home fell by 3.1 per cent to $210,600 from the same period last year.
The strong rise in home sales surprised economists, who had expected only a slight increase to 6.24 - 6.3m in January. Sales were still 4.3 per cent down on last year, however.
The housing figures may add to the Fed’s concerns that a strengthening economy could put pressure on inflation, but weak durable goods orders seemed likely to balance that out, according to analysts.
“Today’s figures are consistent with a steady Fed stance,” said Nick Bennenbroek, a senior currency strategist at Brown Brothers Harriman. “Signs of consumer sturdiness and hints of housing stabilization are an offset to manufacturing weakness.”
Pat Combs, president of NAR, said he saw the housing market stabilising. “The market is trending up from its low last fall,” he said.
The strongest performance was in the west, where sales rose 5.6 per cent, while they rose 4.8 per cent in the midwest.
The data suggested an overall negative view of the state of the economy, analysts said.
“I think the Fed view will be largely negative,” said Mr Ashworth. “The weakness in durable goods was very disappointing, and the strength in existing home sales was responding to a temporary blip we already knew about.”
Existing home sales can be a lagging indicator for housing, because they only register sales at the end of the process of buying a house. Other recent housing data on the number of new houses that builders started in January was down sharply. Figures on new home sales are due out on Wednesday.
posted by Carlos T Mock @ 9:16 AM
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