WASHINGTON – America’s manufacturers saw orders for big-ticket goods go up in October by the largest amount in more than a year, an encouraging sign that the economic recovery was on firm footing at the start of the final quarter.
The Commerce Department reported Wednesday that new orders for “durable” goods – costly manufactured products expected to last at least three years – rose by 3.3 percent last month, up from a 2.1 percent rise registered in September.
“Businesses are more confident that the recovery is real, that it is beginning to turn into an expansion and that general economic conditions will continue to improve into 2004,” said David Huether, chief economist at the National Association of Manufacturers.
In other economic news, consumer spending held steady in October, while people’s incomes grew by a solid 0.4 percent, the department said in a second report. The figures matched economists’ forecasts. The growth in income was encouraging because it provides a critical foundation for future spending.
New claims for unemployment benefits last week dropped by a seasonally adjusted 11,000 to 351,000, the lowest level since January 2001, the Labor Department said in a report that provided fresh evidence that the jobs market is turning around.
New-home sales, meanwhile, declined by 3.5 percent in October from the previous month to a seasonally adjusted annual rate of 1.1 million units, the Commerce Department said in another report. Even with the drop, October’s sales pace represented the fifth best month ever on record and marked a 10 percent increase from the same month a year ago. Economists expect home sales to set a record high for all of 2003.
On Wall Street, stocks were mixed. The Dow Jones industrials were off four points, while the Nasdaq was up seven points in morning trading.
October’s manufacturing performance was considerably stronger than economists were expecting. They were forecasting durable orders to rise by 0.7 percent last month. The 3.3 percent increase represented the best showing since July 2002, when orders soared by 8.1 percent.
The strength in October was fairly broad based, with orders rising for communications equipment, machinery and primary metals, which includes steel. Orders placed for cars and computers, however, dipped.
The economy grew by a stunning 8.2 percent rate in the July-to-September quarter, the fastest pace in nearly two decades. That strong showing – along with a surge in consumer confidence in November – raised hopes for the recovery’s staying power.
Some analysts believe the economy is growing at a slower but still healthy rate of about 4 percent in the current October-to-December period, as some of the stimulus that helped in the third quarter – President Bush’s third round of tax cuts and a wave of mortgage refinancing – begins to fade.
In October consumer spending held steady, after dropping by 0.3 percent in September. Americans’ incomes grew by 0.4 percent last month, up from a 0.3 percent advance the previous month.
The spending and income figures are not adjusted for price changes.
Consumers last month trimmed spending on “durable” goods, such as cars and appliances, by 2.3 percent, not as deep as the 5 percent cut they made in such spending in September. The pullback comes after consumers went on a buying binge during the summer, where they snapped up cars and other goods.
Spending on “nondurables” such as food dipped by 0.1 percent in October, after a 0.2 percent rise the previous month. Spending on services, however, rose by 0.5 percent last month, up from a 0.4 percent advance.
With income growth outpacing spending in October, the nation’s personal savings rate – savings as a percentage of after-tax income – rose to 3.3 percent, from 3 percent in September.
Economists have been predicting that the brisk pace of consumer spending, which helped the economy grow at such a red-hot pace in the third quarter, just couldn’t be sustained and that spending would slow in the current quarter.
Even so, economists still expect consumers to keep their pocketbooks and wallets sufficiently open in the months ahead to help the recovery. Economists are hopeful that stronger growth from elsewhere in the economy_ notably capital investment by business – will help compensate for any slowdown in consumer spending.
Consumer spending accounts for roughly two-thirds of all economic activity in the United States and has been a main force helping the economy get back on surer footing after the 2001 recession.
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