The bill arrives: US hit by 8.5% fall in durable goods orders
By Peronet Despeignes in Washington
Published: October 25 2001 14:06 | Last Updated: October 25 2001 16:50
There were more signs on Thursday of the obvious: Economic activity in the US has eroded rapidly over the past two months.
Government reports issued on Thursday revealed an unexpected plunge in factory orders and home sales last month and a rise in the number of US citizens collecting unemployment benefits to the highest level in nearly two decades.
The US commerce department said orders to factories for cars, trucks, television sets and other durable goods dropped 8.5 per cent in September, the biggest decline since January.
The drop in orders suggests more declines to come in production. The uninterrupted, 12-month erosion of US industrial output is already the longest since the second world war, the Federal Reserve said. Falling output has forced job cuts and reduced hiring.
In a separate report, US the labour department said the number of US citizens on the dole has reached its highest level in nearly two decades, and the trend remained ominous.
The number of unemployment insurance benefit recipients rose to an 18-year high of 3.65m, reflecting mounting layoffs and an evaporation of available jobs.
New requests for benefits rose to a seasonally adjusted 504,000 last week, and the four-week moving average, which provides a clearer picture of the trend, climbed to 10-year high of 505,000.
The figures show growing weakness in the US labour market in October, following a report released earlier this month showing that US employment shrank in September at the fastest pace since the last recession.
Meanwhile, the National Association of Realtors said sales of previously owned homes fell sharply across the country in Sepetember. Existing-home sales dropped 11.7 percent to a seasonally adjusted annual rate of 4.89m units, down from August's record high of 5.54m. Only the Midwest avoided double-digit declines.
David Lereah, NAR's chief economist, said the drop was expected. "Considering the nation essentially came to a halt during the week of the attack, we knew there would be a hit on home sales activity," he said.
In another report, the US labour department said its employment Cost Index - a gauge of inflationary pressures - rose 4.1 per cent in the year to September.
This represents a slight accleration from the previous rise of 3.9 per cent for the year to June, which worried some economists. Many economists expect the rise in wage and benefit costs to slow along with the economy.
All monthly changes are seasonally adjusted.
The effects and aftershocks of the September 11 terrorist attacks were reflected in all reports. In a speech Thursday morning to a conference on international economics, Fed chairman Alan Greenspan, warned that terrorism threatened to reduce trade and its economic benefits.
"Fear of terrorist acts...has the potential to induce disengagement from activities, both domestic and cross-border," he said. "If we allow terrorism to undermine our freedom of action, we could reverse at least part of the palpable gains achieved by postwar globalization."
He said he expected the political backlash against globalization within industrialized countries to eventually be "rejoined", but argued that the benefits of trade expansion outweighed its costs. He said the industrialized world's unilateral opening of its markets to the goods and services of the Third World would be "the single most effective" way for the west to improve the plight of poor economies. |
