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Factory orders show rising consumer demand for durable goods
Declining demand for aircraft pulled the index down in August.
By Joe Richter
Of Bloomberg News
U.S. factory orders unexpectedly fell in August on lower demand for aircraft. Bookings rose for a range of consumer products such as automobiles and appliances, suggesting the U.S. economy strengthened in the third quarter.
''We are seeing a balanced expansion,'' Anthony Santomero, president of the Federal Reserve Bank of Philadelphia, said in an interview. ''We have consumers continuing to spend. We have business investment expanding at a reasonable clip.''
The 0.1 percent drop to $370.5 billion in orders followed a 1.7 percent increase in July, a month that was fueled by a surge in orders for expensive commercial planes, the Commerce Department said in Washington. Economists focused on the 1.3 percent gain outside of transportation, the biggest since March.
''The manufacturing sector is doing quite well,'' said Stephen Stanley, chief economist at RBS Greenwich Capital Markets in Connecticut.
The orders may support the Fed's view that the economy is growing strongly enough to lift interest rates at a ''measured'' pace, even after record oil prices drove down consumer sentiment in September.
A report Friday is forecast to show the United States added 150,000 jobs in September, the most since May and the last employment report before President Bush and Sen. John Kerry of Massachusetts square off in the November election.
''Oil prices are a drag at this time,'' Fed Governor Ben S. Bernanke told reporters in Philadelphia, where he and Santomero spoke at a business economist conference. ''We think the economy can accommodate them at the current levels at least as long as they don't rise substantially more.''
'Economic headwind'
The Fed raised its benchmark interest rate three times since June to 1.75 percent, and Santomero said ''we still have a way to go'' before monetary policy would return to neutral.
Crude oil closed above $50 a barrel in New York for the first time on Friday. Treasury Secretary John Snow, speaking after the Group of Seven industrial nations meeting that day in Washington, called rising oil prices an ''economic headwind.''
Oil prices fell yesterday on expectations that rising U.S. imports will boost inventories and as concerns eased about Nigerian production. Oil for November delivery fell 22 cents to $49.90 a barrel at 1 p.m. on the New York Mercantile Exchange.
In the United States, oil prices will cut economic growth by almost a half percentage point this year, according to a quarterly survey by the National Association for Business Economics presented yesterday. The group lowered its 2004 growth estimate to 4.3 percent from 4.7 percent in May, according to the median of 38 forecasts.
No recession
''Oil prices have probably taken a bite out of the recovery,'' William Poole, president of the Federal Reserve Bank of St. Louis and a voting member of the Fed's rate-setting Open Market committee, told reporters after a speech in Jefferson City, Missouri. ''My own judgment is it isn't a huge bite. I don't see any reason to anticipate that oil prices, even if they remain at this level, will cause a recession.''
The International Monetary Fund on Sept. 29 said global economic growth will slow to 4.3 percent next year from this year's 5 percent, which is the strongest since 1973.
Factory orders were forecast to rise 0.1 percent, the median of 50 economists in a Bloomberg News survey, after an initially reported 1.3 percent increase in July. Through August, orders for were up 12 percent compared with the same period in 2003, the Commerce Department said.
The benchmark 10-year U.S. Treasury note was unchanged in New York with its yield at 4.19 percent.
Durable, consumer goods
Bookings for durable goods, which account for more than half the orders, fell 0.3 percent after rising 1.9 percent in July.
They were pulled down by a 7.4 percent decline in transportation equipment, led by a 43 percent drop in commercial aircraft orders following a surge in July.
Boeing Co., the world's second biggest airplane maker, received 20 aircraft orders in August, down from the 75 orders placed the previous month, the Chicago company said. Sales of multimillion-dollar planes typically come in spurts, contributing to fluctuations in the report's main figure.
New orders for consumer goods rose 1.4 percent in August, the best in three months. Gains included 7.1 percent for household appliances, 1.4 percent for motor vehicles and parts, and 4.6 percent for electronics.
''The economy is well maintained and we're likely to see growth in that 3 percent to 4 percent range ? that's quite good for most industries,'' said Ellen Hughes-Cromwick, an economist at Ford Motor Co., in an interview at the meeting.
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And even with upward revisions, no net job creation during the Bush administration, even with pumping the economy with generous tax cuts and unrestrained government spending.
According to today's Wall Street Journal, payroll employment rose 3.7% in the first three years of the nine previous business cycles, but s still down 1.5% in the latest (page A14).
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Let's see.
We have a recession because:
1. The Clinton economy was built on the .coms hot air.
2. 9/11 happens because Clinton was too busy getting a hummer to pay attention.
We have a recovery because:
1. Bush cut taxes which stimulated spending and growth.
2. Since Bush went after the terrorists not a single act has happened in the US.
Maybe you should change your screen name from reason to confusion.
