Durable goods jump, personal income rises

NEW YORK, Dec. 23 (UPI) -- The government said Thursday rising aircraft demand helped lift durable goods orders, November's personal income beat market expectations, new home sales sank 12 percent, weekly jobless claims rose and consumer sentiment improved.

The Commerce Department said Thursday orders for U.S. durable-goods jumped 1.6 percent to $198.86 billion in November, lifted by orders for civilian aircraft.

Economists on Wall Street had expected orders would rise by only 0.6 percent.

The government revised demand for October to reflect a 0.9 percent decline; the earlier estimate was for a 1.1 percent drop.

Commerce said in November orders for non-defense capital goods excluding aircraft, a barometer of business spending, rose 1.8 percent, after posting a 4.1 percent decline in October. Tax incentives for capital spending known as bonus depreciation allowances are expiring at year-end.

The durable goods numbers are some of the most volatile economic data reported by the government. Estimates are routinely revised, sometimes sharply. Analysts caution against using the monthly figures when trying to tell which way the U.S. economy is going.

The report showed transportation orders rose 8.2 percent as non-defense aircraft jumped 64.2 percent. October transportation demand went up 0.3 percent.

Motor vehicles and parts increased 1.4 percent. Defense aircraft rose 2.5 percent.

Absent transportation, orders for all other durable goods declined 0.8 percent, following October's 1.3 percent drop.

Capital goods orders advanced 1.6percent, following a 0.4 percent decrease in October. Non-defense capital goods, or items meant to last 10 years or more, rose 8.1 percent. Defense-related capital goods orders tumbled 31.8 percent, its sharpest drop since October 2002's 37.2 percent decline.

Commerce said demand fell for computers and electronics by 4.2 percent. Within that category communications equipment orders plunged 35 percent, the sharpest fall since November 2003's 46.4 percent.

Orders rose 4.6 percent for electrical equipment. Primary metals increased 3.9 percent, while fabricated metals fell 0.4 percent. Machinery dropped 3.3 percent.

Commerce also said personal income rose 0.3 percent in November after rising 0.6 percent in October.

Personal consumption rose 0.2 percent after climbing a revised 0.8 percent. Spending was initially seen going up 0.7 percent in October.

Wall Street economists had expected November personal income to rise 0.2 percent and spending to increase 0.3 percent.

Disposable personal income, or income after taxes, rose by 0.3 percent in November following a rise of 0.6 percent in October.

The report showed growth of wages and salaries in November slowed. Wages and salaries increased $10.3 billion last month, after rising $29.7 billion in October.

Spending on durable goods fell 2.4 percent, after a revised 0.9 percent increase. October durables were originally reported as rising 0.2 percent. Non-durable goods spending increased 0.4 percent, after rising 1.6 percent in October. Spending on services gained 0.6 percent in November, after a 0.4 percent increase the previous month.

Personal saving as a percentage of disposable personal income rose to 0.3 percent last month, up from 0.1 percent in October.

A price index for personal consumption expenditures excluding food and energy rose at a 0.1 percent rate in November; match the rise of the previous month.

Commerce also reported new home sales took their biggest plunge in 10 years in November amid record weakness in the Midwest.

Commerce said new single-family home sales sank 12 percent in November to a seasonally adjusted annual rate of 1.125 million. It was the biggest drop since a 23.8 percent drop in January 1994.

Wall Street economists had expected sales would fall 0.7 percent to a 1.217 million annual rate.

October home sales rose 4.2 perce4nt as the government raised the annual rate to 1.278 million from an earlier 1.226 million.

Average rates on 30-year mortgages have been below 6 percent since late July, according to Freddie Mac.

Commerce's report showed new-home demand down in three of four regions in the U.S. last month.

Sales fell 7.1 percent in the Northeast, tumbled 39.4 percent in the Midwest and were down 27.9 percent in the West. Sales climbed 13.6 percent in the South, where about half of overall U.S. activity took place.

The sales decline in the Midwest broke a record and the 27.9 percent decrease in the West was the sharpest fall since January 1982's 31.5 percent.

The inventory of homes on the market rose last month to a 4.5 months' supply from October's 3.9 months' supply.

The report showed the average and median home prices fell in November. The average price was $268,100, compared with a revised $282,900 in October. The median price was $206,300, down from a revised $224,700.

In November 2003 the average price was $268,300 and the median was $207,100.

An estimated 81,000 homes were actually sold last month, down from 99,000 in October, based on figures not seasonally adjusted.

The Labor Department reported the number of workers filing first-time applications for state unemployment benefits rebounded last week but also stayed inside the range that typically indicates an improving job market.

Labor said initial jobless claims rose 17,000 to 333,000 in the week that ended Dec. 18 adter falling 45,000 in the previous week.

The four-week average rose 2,250 to 340,000. Economists say that a weekly average below 350,000 typically indicates an improving job market.

Wall Street economists had expected claims to rise by 18,000.

The Labor Department's report showed the number of workers filing continuing claims for unemployment benefits fell 9,000 to 2,721,000 in the week that ended Dec. 11, the latest week for which data are available.

The unemployment rate for workers with unemployment insurance held steady at 2.2 percent in that week.

In all, 48 states and territories reported a decline in unadjusted initial claims for the week of Dec. 11, while just five reported an increase.

North Carolina reported the biggest decline, a drop of 15,924 c

claims that it attributed to fewer layoffs in the construction, textile, furniture and electronic-equipment industries. Texas reported the biggest increase, a gain of 958 claims.

Meanwhile, the University of Michigan said consumers' attitudes on the economy improved in December.

The University's consumer sentiment index for December rose to a reading of 97.1 from 92.8 in November.

The final reading for the month was above the 95.8 expected by most Wall Street economists and it also was above the 95.7 level originally reported for December.

The components that make up the Michigan index were also stronger. The current conditions index for December was 106.7, after the preliminary reading of 106.3 and November's 104.7.

The expectations index, which tries to divine where consumers believe the economy is heading, came in at 90.9 for December, from 85.2 in November.

The expectations index for December initially had been reported at a 88.8 reading.

Consumer confidence measures are not held in tremendously high regard by Federal Reserve officials, who have long said they prefer to see real data on spending, as opposed to data seeking to understand what consumers say they'll do.

Still, confidence data such as the Michigan report are among the most current of statistics available, and recent data from the survey highlights the somewhat choppy Christmas spending season that's been seen so far, experts said.

Chain-store sales data released earlier in the week were mixed and caused some economists to note that so far sales are underwhelming.

The University of Michigan's report is a survey of consumer attitudes concerning both the present situation as well as expectations regarding economic conditions.

Five hundred consumers are surveyed each month.

A preliminary survey is usually reported about the second Friday of the month while a more complete survey is reported two weeks later. The level of consumer sentiment is directly related to the strength of consumer spending.

Investors watch the report because the pattern in consumer attitudes and spending is often the foremost influence on stock and bond markets.

For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation.

Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. This balance was achieved through much of the nineties.

For this reason alone, investors in the stock and bond markets enjoyed huge gains during the bull market of the 1990s. Consumer sentiment did shift down in tandem with the equity market between 2000 and 2002.

Consumer spending accounts for more than two-thirds of the economy, so the markets are always dying to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. With this in mind, it's easy to see how this index of consumer attitudes gives insight to the direction of the economy.