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Sporadic gains limit economic recovery
©Associated Press WASHINGTON -- The economy's bumpy road to recovery was vividly seen Thursday in a trio of reports: Demand to factories for big-ticket goods posted the best showing in six months, but new-home sales plummeted and unemployment claims hit a two-month high. The economic news provided fresh evidence of what economists feel is the frustrating nature of the economic recovery: It is advancing, but in fits and starts. Orders to U.S. factories for durable goods -- items expected to last at least three years -- jumped by 3.3 percent in January, the first increase since October, the Commerce Department reported. The manufacturing sector, hardest hit by the 2001 recession, has been the biggest drag on the economy's struggle to get back to full throttle. But Thursday's manufacturing report, along with other recent data on the industry, offered hope that the sector may be on track for a revival. "There are challenges to overcome ... but this gets factories off to a good 2003 start," said Ken Mayland, president of ClearView Economics. That helped to give stocks a lift. The Dow Jones industrial average closed up 78.01 points at 7,884.99. A second report from the department, however, showing sales of new, single family homes plunged by 15.1 percent in January -- the biggest decline in nine years -- raised some new questions about consumers' willingness to make big financial commitments amid worries about a war with Iraq, economists said. Data on new home sales were not available for individual states or cities. But anecdotal information suggests the Tampa Bay area fared better than the South as a whole in January. Marvin Rose, a Tarpon Springs real estate analyst who tracks building permits and new home closings, said some local builders reported having their best January ever. Relatively calm weather may have helped. Scott Neal, West Florida sales director for Pulte Homes, the bay area's second-largest builder, said the company's overall home sales grew in January and rose even higher this month. "Our business has been very consistent, very strong in the past two years," he said. The national decline -- which came after new-home sales hit a record monthly high in December -- pushed sales down to a seasonally adjusted annual rate of 914,000, a still respectable level. Still, "You can't dismiss sales being off by 15 percent. It could be a signal that people are hunkering down a tad," said David Seiders, chief economist at the National Association of Home Builders. "I think we are seeing more caution." This comes as, for the third time this year, weekly rates on 30-year mortgages have reached a new low. The average interest rate on 30-year, fixed-rate mortgages dropped to 5.79 percent, according to Freddie Mac, the mortgage company. The rate was the lowest since Freddie Mac began tracking 30-year rates in 1971. Records that reach back earlier than Freddie Mac's indicate that rate is the lowest since the early 1960s. In a third report, the Labor Department said new claims for unemployment benefits rose by a seasonally adjusted 11,000 last week to 417,000, a two-month high, suggesting that businesses are keeping work forces lean, given the uneven economic recovery. The economy has been coping with uneven growth as a quarter of strength has been followed by three months of weakness. And businesses have been struggling to try to gauge demand for their goods during these muddled economic times. The biggest factor holding back the economy's recovery is the reluctance of businesses to make big commitments in hiring and in capital spending, due in part to uneasiness about war and generally to an uncertain business environment. Federal Reserve Chairman Alan Greenspan says he is hopeful that once "geopolitical" uncertainties lift, businesses will be much more willing to step up capital investment and hiring, which would boost economic growth. Although Greenspan says President Bush's proposed 10-year, $1.3-trillion tax cut package isn't needed right now to help out the economy, Bush insisted it is. "There are strong signals that this economy will improve," Bush told reporters. "But I understand we need to have a stimulus package to make sure that the forecasts and the predictions become true." In the manufacturing report, gains were broadbased. Orders for cars, computers, communications equipment, machinery and primary metals, including steel, all registered solid increases. -- Times staff writer Scott Barancik contributed to this report.
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From the Times Business report
From the AP
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