- The Washington Times - Wednesday, May 26, 2004

ASSOCIATED PRESS

Orders to factories for big-ticket goods fell sharply in April after posting a strong gain in the previous month, reflecting the sometimes bumpy recovery being experienced by the nation’s manufacturers.

The Commerce Department reported yesterday that orders for “durables” — costly manufactured goods expected to last at least three years — dropped by 2.9 percent last month, marking the biggest decline since September 2002.

But April’s slackening in demand for big-ticket goods came after sizable gains in February and March, when orders went up by 3.9 percent and a strong 5.7 percent, respectively.

New-home sales fell by 11.8 percent in April from the previous month to a seasonally adjusted annual rate of 1.09 million units, the lowest level since November, the department said in a second report.

The decline, which followed a big 9.7 percent jump in March that left sales at a record high pace of 1.24 million units, came as mortgage rates climbed. The average rate on a 30-year mortgage in April was 5.83 percent, up from 5.45 percent in March.

David Seiders, chief economist at the National Association of Home Builders, doesn’t see the drop in April’s sales as worrisome. Looking ahead, he believes that an improved job climate should help offset the impact of higher mortgage rates, making for healthy housing activity this year.

On the manufacturing front, economists were predicting a drop in big-ticket orders for April given the robust demand in March, but they were forecasting a smaller, 0.8 percent decline.

While the larger-than-expected drop was disappointing, it was viewed as a temporary pause, rather than a harbinger of an unraveling of the recovery in the manufacturing sector.

“Manufacturing is recovering well, and I fully expect that to continue for many months,” said economist Ken Mayland, president of ClearView Economics. Even with the drop in April, orders for big-ticket goods are up an impressive 12.4 percent from a year ago, he pointed out.

Other recent reports, including one released by the Federal Reserve earlier this month, suggested that manufacturing activity was healthy in April.

Even so, manufacturers, hardest hit by the 2001 recession, have struggled over the past three years to get back on firm footing, a journey that has had its up and downs.

Still, the overall national economy is growing solidly. And with inflation starting to creep up, a growing number of economists believe Federal Reserve policy-makers might order their first interest rate increase in more than four years next month. Others, however, are forecasting a rate rise in August or later.

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