Disappointing data signal bumpy recovery

WASHINGTON (AP) — A reminder that the path to an economic recovery will be a slow and bumpy one emerged Friday from weaker-than-expected data on US durable goods orders and new home sales.

Orders for durable goods, which are expected to last at least three years, dropped 2.4 percent in August, after rising a revised 4.8 percent in July, the Commerce Department said. Economists had expected a 0.5 percent increase, according to a survey by Thomson Reuters. It was the second drop in three months.

Most of the decline was due to a steep fall in orders for airplanes and related parts. But economists were disappointed that business investment didn’t pick up.

A category known as “core capital goods,” a gauge of business spending on machinery and computer equipment, fell 0.4 percent, its second straight drop. It fell 1.3 percent in July.

Many economists hope business investment, along with growing exports, a turnaround in housing and government spending will drive the recovery. Consumer spending, which accounts for 70 percent of the economy and has fueled previous rebounds, is expected to remain weak due to widespread job losses, sluggish income growth and tight credit.

The reports “are a wake up call for anyone expecting a smooth transition to a strong economic recovery,” said Paul Ashworth, senior US economist for Capital Economics.

The durable goods figure caused some economists to lower their forecasts for third-quarter economic growth. Still, the volatility isn’t unexpected as the economy struggles to arise from the worst recession since the 1930s.

“No one said this would be a smooth recovery,” Benjamin Reitzes, an economist at BMO Capital.

Sales of new homes inched up 0.7 percent last month to a seasonally adjusted annual rate of 429,000 from 426,000 in July, below economists’ expectations. Sales have risen 30 percent from the bottom in January. Yet they remain about 70 percent below their peak of four years ago.

The Commerce Department report was the second straight disappointing sign for the housing market. The National Association of Realtors on Thursday said sales of previously occupied homes, which make up the bulk of the market, dipped 2.7 percent last month.