Durable-goods, housing reports are downers

WASHINGTON - A reminder that the path to an economic recovery will be slow and bumpy emerged yesterday from weaker-than-expected data on durable-goods orders and new-home sales.

The reports "are a wake-up call for anyone expecting a smooth transition to a strong economic recovery," Paul Ashworth, senior U.S. economist for Capital Economics, said.

The volatility isn't unexpected as the economy struggles to arise from the worst recession since the 1930s. The reports also reflect the uncertainty as some government stimulus efforts wind down.

Even as the housing sector is recovering, for example, a tax credit for first-time buyers that has helped boost sales is set to expire Nov. 30. There's a bipartisan push on Capitol Hill to extend it, but prospects for the real estate market remain hazy.

And while the manufacturing sector has made gains, they are partly due to the "Cash for Clunkers" program that supplied auto-buyer rebates but that ended last month.

And the banking system has managed to stabilize mainly because of extraordinary aid from the Federal Reserve and the Treasury, which are starting to rein in some of that financial support.

For now, the economy's improvement is coming mainly in spurts.

Orders for durable goods - manufactured products such as refrigerators 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 yesterday. 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.

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.