Durable Orders Decline Is Discounted

By John S. McClenahen Don't read too much into the U.S. Commerce Department's Sept. 25 report that new orders for manufactured durable goods fell 0.9% in August, their first decline since April. New orders for manufactured durables, goods designed to last three years or longer, totaled $173.3 billion in August. "The Northeast blackout and auto sales volatility may be blamed for a one-month decline in durable goods, but this should ultimately be washed out by a strong upswing in business activity," says Daniel J. Meckstroth, chief economist at the Manufacturers Alliance/MAPI, an Arlington, Va.-based business and public policy research group. David Huether, chief economist for the Washington, D.C.-based National Association of Manufacturers, terms the decline "a normal correction following sharp rises the previous two months." Indeed, Huether claims the short-term outlook for manufacturers is brighter now than during the first six months of 2003. Significantly, he says, the three-month change in orders for non-defense capital goods rose in August for the sixth consecutive month. "This statistic tends to smooth out monthly fluctuations and is a positive indication that the investment recovery that began in the second quarter remains on track." Meanwhile, sales of both new and existing homes gained ground in August. Sales of new one-family homes last month were at a seasonally adjusted annual rate of 1.15 million, 3.4% above the revised July rate of 1.112 million, the Commerce Department and the U.S. Department of Housing and Urban Development jointly reported. Sales of existing single-family homes set a new record in August. Sales of existing single-family homes rose 5.5% to a seasonally adjusted annual rate of 6.47 million units from a revised rate of 6.13 million units in July, the previous record level, says the National Association of Realtors (NAR), Chicago. "We expect home sales to moderate but remain historically strong in the coming months," says Cathy Whatley, NAR's president and owner of Buck & Buck Inc. in Jacksonville, Fla. There were some encouraging labor market data as well. Initial claims for unemployment insurance fell to a seasonally adjusted figure of 381,000 last week, some 19,000 fewer than the previous week's revised figure of 400,000, the U.S. Labor Department reported. The four-week moving average for initial jobless claims was 407,000 last week, however, suggesting that a hoped-for sustained improvement in the U.S. labor market has yet to occur.

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