Durables, New Home Sales Drop

By John S. McClenahen After a very strong March, a gain of 5.7%, new orders for manufactured durable goods in April were generally expected to edge downward. They did more than that. Orders for durables -- long-lasting stuff like airplanes, autos and appliances -- plummeted 2.9% to 191.3 billion in April, the U.S. Commerce Department reported on May 26. New orders for non-defense capital goods, a closely watched indicator of industrial investment, were down 2.7%. However, David Huether, chief economist for the Washington, D.C.-based National Association of Manufacturers, discounts April's drop in durables, characterizing it as a temporary pause in U.S. manufacturing's recovery from the 2001 recession. "The drop in orders last month follows two months of extraordinary gains and, thus, is not all that unexpected," says Huether. "More importantly, new durable orders year-to-date are up 12% compared to the first four months of 2003," he stresses. Meanwhile, sales of new homes also were posting a dramatic drop. Sales of one-family houses last month were at a seasonally adjusted annual rate of 1.093 million, 11.8% below the revised March rate of 1.239 million, according to data jointly released May 26 by the U.S. Commerce Department and the U.S. Department of Housing and Urban Development. But these data, too, are being discounted. "Although some weakening in home sales is credible given the rise in mortgage rates, the drop in [Wednesday's] report is not necessarily evidence that the trend has turned," says UBS Investment Research, New York. "In particular, there has been corroboration in either mortgage applications or the housing market index."

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