Durable-goods orders up by 3 percent; New-home sales soar

Wednesday, April 25th 2001, 12:00 am

By: News On 6

WASHINGTON (AP) _ Orders to U.S. factories for big-ticket manufactured goods jumped by 3 percent in March, but all the strength came from strong demand for ships, cars and other transportation equipment. New-home sales soared to a record level.

The increase in durable-goods orders _ items expected to last at least three years _ was the first since December, the Commerce Department said Wednesday. In January and February, durable-goods orders fell by 7.3 percent and 0.3 percent, respectively.

In another report, the government said new-home sales shot up in March by 4.2 percent to a record 1.02 million, surpassing the previous monthly high level of 1 million set in December of 2000.

In February, new-home sales rose 1.2 percent, according to revised figures, better than the 2.4 percent decline the government previously estimated.

The performance of both durable-goods orders and new-home sales last month was better than many analysts expected. They had forecast a 0.5 percent rise in durable-goods orders and a dip in new-home sales.

While the manufacturing sector has been bearing the brunt of the economic slowdown, the housing market has managed to remain solid. Low mortgage rates are one of the big reasons why the market has held up so well even as consumer confidence sagged and a slide in the stock market made people fell less wealthy.

New-home sales rose in all parts of the country except for the West, where they fell.

Seeking to stave off recession, the Federal Reserve cut interest rates four times this year, totaling 2 percentage points. The rate reductions lower borrowing costs and are designed to induce consumers to spend and businesses to invest, thus boosting economic growth.

The big increase in durable-goods orders in March stemmed from a whopping, 21.4 percent rise in orders for transportation products. While the demand for such products was widespread, the biggest gains were reported for new orders for ships and military tanks. In February, all transportation orders fell by 1.2 percent.

Because the transportation sector is often volatile _ meaning demand can swing widely from month to month _ many economists like to look at a separate figure to help gauge the health of the manufacturing industry.

Excluding transportation equipment, durable-goods orders fell by 1.8 percent in March, the fourth straight monthly drop, suggesting the manufacturing sector remains fragile.

Wednesday's report also showed that orders for electronic and electrical equipment, including semiconductors and home appliances, fell by 5.3 percent in March, after a 6.7 percent increase the month before.

Industrial machinery, including computers and machine tools, saw orders decline by 0.7 percent in March, following a 3.1 percent drop in February.

And, primary metals, the category that includes steel, fell by 1.7 percent in March after a 1.1 percent decline. With the March decline, orders for primary metals have fallen for six months in a row.

However, shipments of durable goods, a sign of current demand, edged up 0.1 percent in March, the first increase since September. Shipments of cars and other transportation equipment led the March increase. In February, shipments fell by 0.9 percent.