US recovery seems to falter
By Alan Zibel And Dan Wagner |
August 26, 2010, Thursday
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Print Edition
Print Edition
THE United States economic recovery appears to be stalling as companies cut back last month on their investments in equipment and machines and Americans bought new homes at the weakest pace in decades.
Overall orders for big-ticket manufactured goods increased 0.3 percent in July, the Commerce Department said yesterday. But that was only because of a 76 percent jump in demand for commercial aircraft.
Taking out the volatile transport category, orders for durable goods fell at the steepest rate since January. Business orders for capital goods took their sharpest drop since January 2009, when the economy was stuck in the deepest slump in decades.
Separately, the department said new home sales fell 12.4 percent in July from a month earlier to a seasonally adjusted annual sales pace of 276,600. That was the slowest pace on records dating back to 1963. Collectively, the past three months have been the worst on record for new home sales.
The weak sales mean fewer jobs in the construction industry, which normally powers economic recoveries. Each new home built creates, on average, the equivalent of three jobs for a year and generates about US$90,000 in taxes, said the National Association of Home Builders.
The two reports are likely to stoke fears that the economy is on the verge of slipping back into a recession. They follow Tuesday's report that showed sales of previously owned homes fell last month to the lowest level in decades. Unemployment remains near double digits and job growth in the private sector is slowing.
"The rebound in manufacturing was one of the bright spots in an otherwise disappointing recovery," said Paul Ashworth, senior US economist at Capital Economics. "Take it away, throw in a relapse in housing, and you don't have much left."
Factory orders are a key measure of the economic recovery. Manufacturers have helped to lead the rebound. They filled orders for businesses that were building up stocks. But many firms are done restocking, cooling demand for factory goods.
Overall orders for big-ticket manufactured goods increased 0.3 percent in July, the Commerce Department said yesterday. But that was only because of a 76 percent jump in demand for commercial aircraft.
Taking out the volatile transport category, orders for durable goods fell at the steepest rate since January. Business orders for capital goods took their sharpest drop since January 2009, when the economy was stuck in the deepest slump in decades.
Separately, the department said new home sales fell 12.4 percent in July from a month earlier to a seasonally adjusted annual sales pace of 276,600. That was the slowest pace on records dating back to 1963. Collectively, the past three months have been the worst on record for new home sales.
The weak sales mean fewer jobs in the construction industry, which normally powers economic recoveries. Each new home built creates, on average, the equivalent of three jobs for a year and generates about US$90,000 in taxes, said the National Association of Home Builders.
The two reports are likely to stoke fears that the economy is on the verge of slipping back into a recession. They follow Tuesday's report that showed sales of previously owned homes fell last month to the lowest level in decades. Unemployment remains near double digits and job growth in the private sector is slowing.
"The rebound in manufacturing was one of the bright spots in an otherwise disappointing recovery," said Paul Ashworth, senior US economist at Capital Economics. "Take it away, throw in a relapse in housing, and you don't have much left."
Factory orders are a key measure of the economic recovery. Manufacturers have helped to lead the rebound. They filled orders for businesses that were building up stocks. But many firms are done restocking, cooling demand for factory goods.
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