Weather Better Than The Economy

By John S. McClenahen Five weeks ago much of the East Coast of the United States was buried in snow. The deep snow is gone, but like the few patches that remain in parking lots, the economic effect lingers on, particularly in housing. Sales of new single-family houses were at an annual rate of 854,000 in February, a not-inconsequential 8.1% below the revised January 2003 rate of 929,000, reveal data jointly released by the U.S. Commerce Department and the U.S. Department of Housing & Urban Development. Maury Harris, chief U.S. economist at UBS Warburg LLC, New York, says that the weather, the prospect of war in Iraq and a generally weaker U.S. job market were factors in the February fall-off. Those same factors plus rising energy costs also figure into the 1.2% decline in February's new orders for computers, machinery and other durable goods. New orders totaled $170.2 billion last month, says the Commerce Department. "There does not seem to be enough traction in the economy for the manufacturing segment to sustain forward momentum," opines Daniel J. Meckstroth, chief economist at Manufacturers Alliance/MAPI, an Arlington, Va.-based business policy group. In February, new orders declined in every category -- with the exception of defense capital goods, points out David Huether, chief economist at the National Association of Manufacturers, Washington, D.C. "Of note is that non-defense capital goods orders, which are a good indicator for business investment demand, dropped a sharp 5.2% after increasing the previous two months." Unless there has been a surge in new orders for durable goods this month, and that's probably not happening, economists may again be adjusting downward their GDP forecasts. Indeed, at Merrill Lynch & Co., New York, they figure that flat capital spending during this calendar quarter could shave up to a half percentage point off the already very weak projection of 1% real growth for the first three months of 2003, says David A. Rosenberg, the securities firm's chief North American economist.

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