Durable-Goods Orders Take Biggest Dive in 7 Months
New orders for costly U.S.-made manufactured goods dropped at the sharpest rate in seven months during August, the Commerce Department said Wednesday, as demand fell across nearly every major category.
Orders overall plummeted 4.9% -- much steeper than the 3.1 percent decline Wall Street economists had forecast -- after rising a revised 6.1 percent in July.
Previously, the department said July orders were up 6 percent.
The soft durable goods report did little to resolve concerns over whether the economy was headed for a downturn. Bond prices initially edged higher in a sign of investor caution but later gave up the gains and stocks gained on hopes for more interest-rate cuts.
Federal Reserve Chairman Ben Bernanke told Congress last week that the U.S. central bank was aiming to "get out ahead of" the potential economic drag from deteriorating credit
conditions by cutting official interest rates a half percentage point on Sept. 18.
Still, analysts are watching anxiously to see whether problems in U.S. subprime mortgage markets that other nations in Europe and elsewhere say are affecting them will pull U.S.
and global growth down.
Richard Huber, an economist with A.G. Edwards, said that while it appeared growth was slowing, there was no evidence yet to support a view that it might deteriorate into a more serious downturn.
"All the data coming out seem to support the conclusion that the third quarter will just be a slow-growth quarter, neither recessionary nor the above-trend growth that we had in
the second quarter," Huber said.
The government's monthly durable goods report is volatile and subject to substantial revisions, but the August report was striking because the declines were so widespread. Even excluding transportation, orders fell 1.8 percent after rising 3.4 percent in July.
The drops in overall orders and in orders excluding transportation both were the steepest since January when they dropped 6.1 percent and 3.1 percent, respectively.
Excluding defense, durable goods orders fell 5.9 percent in August, more than reversing a 4.7 percent gain in July.
A separate report underlined the depth of the problem in U.S. mortgage markets as applications for new loans fell last week after climbing for three straight weeks.
The Mortgage Bankers Association said its index of mortgage application activity dropped 2.8 percent in the week ended Sept. 21, as a drop in demand for home purchase loans overshadowed a fourth consecutive rise in refinancing requests.
Weaker demand for applications to buy homes is consistent with other reports finding sales and prices slumping to multiyear lows.
Existing homes sales sank in August to a five-year low, while the supply of unsold single-family houses ballooned to an 18-year high, the National Association of Realtors said Tuesday.
The durable goods report also implied companies were becoming less willing to invest in new equipment. Nondefense capital goods orders excluding aircraft fell 0.7 percent in August following a 0.9 percent gain in July.