- The Washington Times - Thursday, March 27, 2003

Bad weather and prewar jitters took a toll on the economy in February: New-home sales plunged to the lowest level in nearly three years and manufacturers saw their demand drop.
The pair of reports released by the Commerce Department yesterday highlighted the latest batch of potholes the economy was hitting.
"The reports suggest that February was a very weak month for the general economy," said Lynn Reaser, chief economist at Banc of America Capital Management. "We saw the negative effects of bad weather, worries about an impending war with Iraq, an increase in oil prices and a decline in the stock market."
New-home sales plummeted 8.1 percent to a seasonally adjusted annual rate of 854,000, the lowest level since August 2000. That came on top of an even steeper 12.6 percent decline in January.
The drop was a huge 36.8 percent in the Northeast, which was hit hard by snowstorms during the month. That pushed down sales in the region to a seasonally adjusted annual rate of 48,000, the lowest since January 1996.
Sales in the South fell by 8.6 percent to a rate of 395,000, and in the Midwest by 6.3 percent to a pace of 149,000. In the West, sales were flat, at a rate of 262,000.
"The weather is a problem, and so is the weight of uncertainty on consumer behavior," said David Seiders, chief economist at the National Association of Home Builders. "I'm assuming both are quite temporary."
In the manufacturing report, orders to factories for big-ticket goods fell 1.2 percent in February, unwinding part of the 1.9 percent gain reported in January.
Private economists had predicted orders for durable goods products expected to last at least three years would fall as companies put off buying new equipment with war imminent.
The weakness in orders to factories was broad-based, with losses reported for computers, cars and metals.
"There does not seem to be enough traction in the economy for the manufacturing segment to sustain forward momentum," said Daniel Meckstroth, chief economist at the Manufacturers Alliance/MAPI, a research group.
The manufacturing sector, hardest hit by the 2001 recession, has been the biggest drag on the economy's ability to make a full recovery.
Given all the uncertainty because of the war with Iraq, Federal Reserve policy-makers last week decided to keep short-term interest rates at 1.25 percent, a 41-year low. They said they would keep a close eye on economic developments surrounding the war.
President Bush has offered a legislative package made up mostly of tax cuts to revive the economy.
In the durable-goods report, orders for automobiles fell 1.5 percent in February after a 9.9 percent advance in January.
Excluding orders for transportation equipment, durable-goods orders declined 2.1 percent in February, the largest drop in eight months.
Orders for computers plunged 12.3 percent after a 1.2 percent rise in January. For primary metals, the category including steel, orders fell 2.3 percent after January's 2.8 percent increase.
Shipments, a good barometer of current demand, decreased 1.6 percent in February after a 2.7 percent gain in January.
The biggest factor holding back the economy's recovery is the reluctance of companies to make big commitments in hiring and in capital spending, partly because of uneasiness about war and the uncertain business environment.
The nation's unemployment rate rose to 5.8 percent in February as the economy lost 308,000 jobs.
In another report, the percentage credit-card accounts that were 30 or more days late on payments in the final quarter of 2002 rose to a seasonally adjusted 4.07 percent, a record high after 4 percent in the third quarter, the American Bankers Association said.
"The rise in delinquencies is not surprising given the cumulative weight of layoffs and the poor prospect for re-employment in the face of anemic job growth," said James Chessen, the association's chief economist.

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