August Sees Decline in US Durable Orders and Home Sales

28 September 2004

Data released Monday by the US Commerce Department shows a marginal 0.5% decline in August of durable orders (goods intended to last upward of three years), while the National Association of Realtors reported sales of existing homes down 2.7%.

According to the department, the main factor in the fall in durable sales was a drop in aircraft orders, which tend to vary in large blocks from month to month. In general, however, durable-goods orders are seen by economists as a reliable indicator of economic activity.

Comments economist Michael Moran of Daiwa Securities America: "The economy is good but not great. It is not strong enough to put a meaningful dent in unemployment. It is not strong enough to lead to vigorous demand for labor and vigorous growth of new jobs. But at the same time, we're not deteriorating."

According to the NAR, the August fall in sales of existing homes represents a cooling after home resales surged by more than 15% during the first half. With the August decline, the average inventory of homes on the market equates to around 4.6 months, compared with a backlog of 4.4 months in July and 4.2 months in June.

Says NAR chief economist David Lereah: "We're at a more sustainable level now, but long term there should be some additional easing toward the end of the year."

Data sourced from Wall Street Journal Online; additional content by WARC staff