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  • Feb 27th, 2004
  • Comments Off on US durable goods orders drop, jobless claims rise
New orders for expensive US factory goods dropped unexpectedly in January while claims for jobless aid rose a bit last week, according to government reports on Thursday that offered mixed economic news.

Orders for durable goods - items meant to last three years or more - slid 1.8 percent last month after an upwardly revised gain of 1.6 percent in December, the Commerce Department said.

Demand for cars and aircraft fell sharply. Excluding transport equipment, orders were up a solid 2.0 percent.

While overall orders were much weaker than expected on Wall Street, where economists had looked for a 1.4 percent rise, the report suggested further gains ahead for business spending, which is seen as crucial for a sustained recovery.

The revision to December's data, which had previously shown orders as up only 0.3 percent, also helped take the sting out of the often-volatile report.

Nonetheless, the volume of orders last month still stood below November's level.

Markets saw the report as a good sign for the economy and prices for US Treasury bonds slipped, while the value of the dollar rose slightly.

Separately, the Labour Department said first-time claims for state unemployment benefits rose 6,000 last week to 350,000, in line with market expectations.

A four-week moving average of initial claims, which irons out weekly fluctuations, rose for a fourth straight week to 354,750, its highest level since late December.

A 10.4 percent plunge in orders for transportation equipment - the largest decline since September 2002 - accounted for much of the weakness.

Demand for motor vehicles dropped 5.1 percent, while orders for civilian aircraft plummeted 27.9 percent and orders for defence aircraft fell 34 percent.

The report, however, offered good news on business investment spending.

Non-defence capital goods orders, excluding aircraft - which are seen as a proxy for future business spending - rose 3.6 percent last month after a 3.8 percent gain in December.

While computer orders slipped 2.1 percent, orders for communications equipment shot up 73.3 percent, their biggest gain since January 1997.

A collapse in business investment pulled the US economy into recession in 2001 and capital spending remained weak through much of the ensuing lethargic recovery.

But last year, investment spending began to rebound smartly, helping broaden the range of the previously narrow recovery and offering hope for a sustainable expansion.

As the economy has picked up, layoffs have eased but hiring has remained weak.

The Labour Department report showed the number of people continuing to draw a week of benefits dropped 62,000 to 3.10 million in the week ended February 14.

A more comprehensive picture of the job market is likely to emerge with Labour's February employment situation report, scheduled for release on March 5.

A preliminary Reuters survey found economists are expecting the report to show a 125,000 rise in non-farm payrolls after the 112,000 gain in January. The unemployment rate is expected to remain unchanged at 5.6 percent.

New home sales fall

Sales of new US homes fell in a harsh January to the lowest level since May but still beat expectations as the housing market slowed only slightly from record highs, a government report showed on Thursday.

The Commerce Department said sales of new single-family homes slipped 1.7 percent to a seasonally adjusted 1.106 million annual rate from an upwardly revised 1.125 million rate in December.

Copyright Reuters, 2004


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