Triple Threat For The Economy

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Triple Threat For The Economy

Consumer Confidence Plummets For Fifth Straight Month Sales Of New Homes Dropped In January Durable Goods Orders Decline

WASHINGTON, Feb. 27, 2001 CBS/AP (CBS) Three new reports released Tuesday carried bad economic news. Americans' confidence in the shaky U.S. economy slumped in February to its lowest level in over four and a half years, sales of new U.S. homes plummeted in January and durable goods orders have taken a sharp drop.

The Conference Board said a bleak employment outlook and weakening business conditions pushed the overall consumer confidence index down for the fifth straight month to 106.8 from a revised 115.7 reading in January.

Despite the sharpness of the decline, the private research group said the index remains above recessionary levels.

"While the short-term outlook continues to signal a severe economic downturn, consumers' appraisal of current economic conditions suggests we are still undergoing moderate growth and not a recession," said Lynn Franco, director of the Conference Board's Consumer Research Center.

The almost nine point drop was sharper than Wall Street analysts expectations for a 109.6 level, compared with a previously reported 114.4 January reading. The last time the index was this low was June 1996 when it was 100.1.

The Conference Board, a research group financed by major international corporations, surveys 5,000 U.S. households nationwide to compile its monthly index.

"The only way out of this mess is for the stock market to rebound substantially and rapidly - particularly the Nasdaq. But we have few hopes this is a realistic proposition. It now seems appropriate to start thinking about a fed funds rate as low as four percent by the summer," Ian Shepherdson, chief U.S. economist at High Frequency Economics told CBS MarketWatch.

Meanwhile, sales of new U.S. homes plummeted in January, the government said in a report showing the housing market may now be slowing as the world's biggest economy weakens.

The number of new, single-family homes sold in January fell 10.9 percent to an annual rate of 921,000 after reaching a record 1.034 million annual rate in December, reflecting declines in every region across the nation, the Commerce Department said. It was the largest monthly decline since a 23.8 percent drop in January 1994.

Last month's decrease in new home sales was bigger than estimated by analysts, who had figured sales totaled an annual 930,000 in January.

The supply of available new, single-family homes rose in January, increasing to 4.1 months' worth at the current sales pace from 3.6 months' worth in December.

Sales of new homes in the South, the largest housing market, declined 6.3 percent in January while sales in the Northeast tumbled 18.5 percent. Sales in the West fell 18.7 percent and those in the Midwest dropped 7.0 percent.

The median home price rose to $169,800 in January from $158,600 a month earlier, the department said.

The new homes sales data was in line with a recent report showing a declining pace in sales of previously owned homes.

Earlier this week, the National Association of Realtors reported that existing home sales fell for the second straight month in January, dropping 6.6 percent to an annual rate of 4.65 million units. That sales pace was the lowest since January 2000, when sales measured 4.54 million.

There was also bad news for the troubled manufacturing sector. The Commerce Department says orders to U.S. factories for big-ticket manufactured goods plunged six percent in January. Durable goods orders overall were at their lowest level in 19 months.

The decline was larger than expected, with much of the decrease centered in the volatile aircraft category.

Orders for transportation products declined 22 percent. Excluding the transportation category, orders fell by three-tenths of one percent.

For electronics and electrical equipment, including semiconductors, orders declined six-point-two percent.

The bad economic news comes as President Bush prepares to outline his budget plan in an address before a joint session of Congress.

http://cbsnews.cbs.com/now/story/0,1597,273457-412,00.shtml

-- Martin Thompson (mthom1927@aol.com), February 27, 2001


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