Associated Press
08.25.2004

America's factories saw orders for costly manufactured goods in July post the biggest gain in four months. New-homes sales, meanwhile, slid, according to a pair of reports that offered a mixed picture of economic activity.

The Commerce Department reported Wednesday that orders for durables goods - big-ticket items expected to last at least three years - rose 1.7 percent in July from the previous month - lifted by stronger demand for goods including airplanes, machinery and communications equipment.

The increase - the largest since March - followed a 1.1 percent advance in June. The showing in July was stronger than the 1 percent rise that some economists were forecasting.

Jerry Jasinowski, president of the National Association of Manufacturers, said the latest durables report offered "solid evidence that the manufacturing recovery is on track."

A second report from the department showed that sales of new homes declined by a sharp 6.4 percent in July from the previous month to a seasonally adjusted annual rate of 1.13 million units. The decline was steeper than analysts were expecting and left home sales at their lowest level since December.

Sales in June declined 5.6 percent, according to revised figures, which showed sales were even weaker than previously reported.

The drop in home sales comes amid a sluggish jobs climate and high energy prices, which may have made some people wary of making a big financial commitment, analysts say.

Even with the slowdown, David Seiders, chief economist at the National Association of Home Builders, said he thinks sales of both new homes and previously owned homes are still are track to hit new record highs for all of 2004. "There's been some cooling, but the housing market is still in very, very good condition," he said.

On Wall Street, stocks were mixed. The Dow Jones industrials were off four points, while the Nasdaq was up two points in late morning trading.

President Bush is counting on the economy to come out of the rough patch experienced in the early summer by the time voters go to the polls in November.

Democratic rival John Kerry says the president's economic policies, especially his tax cuts, are flawed - mostly helping the wealthy but squeezing the middle class. And, Bush's policies also haven't produced significant job creation, he argues.

The Federal Reserve, wanting to keep inflation under control, boosted interest rates on Aug. 10 to 1.50 percent. The Fed took the action even though Fed Chairman Alan Greenspan had acknowledged weeks before the Fed meeting that the economy had hit a "soft patch" in June.

In the manufacturing report, orders for all transportation equipment rose 5.6 percent in July, the biggest gain since February, mostly reflecting stronger demand for airplanes. In June, transportation orders rose 4.7 percent.

Excluding orders for transportation equipment, bookings for all other goods nudged up 0.1 percent in July, an improvement from the 0.3 percent decline in June. Orders for machinery in July increased 2.1 percent, up from a 1.1 percent rise the month before.

For communications equipment, orders rose 5.1 percent in July, compared with a 4.4 percent drop in June. Orders for electrical equipment and household appliances increased by 5 percent in July, a turnaround from the 5.5 percent decline recorded for June.

Orders for non-defense capital goods jumped 9 percent in July. That was the largest rise since July 2002 and followed a 1.1 percent advance in June. The category is watched closely by economists as an indication of businesses' plans to boost spending on equipment and other goods to modernize.

There were some soft spots: orders for automobiles dropped 5.3 percent in July, the largest decline in nearly a year. Orders for computers and fabricated metal products also showed declines.

In the housing report, new-home sales in July fell in every region except for the Midwest, where sales climbed to a new record annual rate of 260,000 units, representing a 21.5 percent jump from June's level.

Sales declined 23.5 percent in the Northeast to an annual rate of 62,000. In the South, sales dropped 15.9 percent to a pace of 522,000 and in the West, they dipped 1.7 percent to a rate of 290,000.

Meanwhile, Toll Brothers Inc. said profit for its latest quarter surged 56 percent as demand for new luxury homes remained strong. The Pennsylvania-based home builder reported net income of $106 million, or $1.31 a share, for the third quarter ended July 31, compared with $68.2 million, or 90 cents a share, a year earlier.

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