Economy continues uneven recovery
WASHINGTON — The nation’s factories saw orders for big-ticket goods fall for the second straight month in May, typifying the often uneven road of recovery braved by manufacturers. New-home sales, meanwhile, shot up to a record high.
The Commerce Department reported Thursday that orders for durables — costly manufactured products expected to last at least three years — dropped by 1.6 percent in May from the previous month. The weakness was broad, with demand slackening for cars, machinery, computers and other goods.
The decline, on the heels of a 2.6 percent decrease in April, disappointed economists. They were forecasting a 1.5 percent rebound in orders for May. Still, economists and industry representatives did not believe the back-to-back declines were a sign of troubles ahead for manufacturers.
National Association of Manufacturers President Jerry Jasinowski said he viewed the declines as a temporary pause. “New orders for durable goods have taken a quick breather after a yearlong sprint,” he said.
In a second report from the department, new-home sales surged by 14.8 percent last month to a seasonally adjusted annual rate of 1.37 million, a monthly record. The showing came after sales sagged by 7.9 percent in April.
An improved job climate is helping to offset a recent rise in mortgage rates, which still remain low by historical standards. David Seiders, chief economist at the National Association of Home Builders, predicts new-home sales for all of 2004 will set a record.
Sales in the Northeast rose by 53.2 percent in May from April to an annual rate of 121,000, the highest since January 1989. In the South, sales rose to a record rate of 663,000, a 20.3 percent increase from April. Sales climbed by 6.5 percent in the West to a pace of 379,000. But in the Midwest, sales were flat in May at a rate of 206,000.
In other economic news, the number of new people signing up for unemployment benefits last week rose by a seasonally adjusted 13,000 to 349,000, the Labor Department said. Part of the rise was attributed to laid-off workers filing claims when state employment offices reopened after being closed to observe the national day of mourning for former President Ronald Reagan.
On the manufacturing front, other recent reports, including two from the Federal Reserve last week, suggested that factory activity was healthy in May. Other barometers of the national economy’s standing continue to suggest it is on solid ground.
Against that backdrop, economists widely expect the Federal Reserve will raise short-term interest rates for the first time in four year when it meets next week. The Fed’s main lever to influence economic activity is currently at a 46-year low of 1 percent. Most economists are forecasting a one-quarter percentage point rise.