US Durable Goods Orders Up 9.9 Percent
The disappointing report on durable goods led several economists to downgrade their forecasts for third-quarter economic growth. Michael Feroli, an economist at JPMorgan Chase, lowered his forecast to an annual rate of 1.6 percent, down from 1.8 percent. Peter Newland, an economist at Barclays Capital, reduced his forecast to a rate of 1.8 percent from 2 percent.
Either figure would reflect little improvement from the April-June growth rate of only 1.3 percent.
Business investment has slumped even as consumers have become more hopeful about the economy in recent months. Consumer confidence rose in October to a five-year high. Retail spending increased in September, mainly because Americans bought more cars, iPhones and appliances. And home sales are up this year, contributing to a nascent housing recovery.
Consumer spending drives nearly 70 percent of economic activity."We have the consumer to thank for keeping the economy above water," Feroli said. Still, the gains are far from what is needed to ignite the economy and spur rapid hiring. Economists at JPMorgan Chase project consumer spending could increase at an annual rate of 2.2 percent in the third quarter. That's better than the 1.5 percent rate in the second quarter, but still anemic by historical standards. Meanwhile, sluggish business investment has dragged on job creation at U.S. factories. Manufacturers slashed 20,000 jobs in the third quarter. Factories had added 194,000 jobs in the previous three quarters. The job market has been a key topic in this year's presidential election, which is less than two weeks away. A separate report Thursday suggested hiring remains modest, at best. Weekly applications for unemployment benefits fell last week to a seasonally adjusted 369,000, stabilizing after two weeks in which seasonal factors distorted the data. The four-week average, a less volatile measure, rose to 368,000, the Labor Department said. Applications are a proxy for layoffs. When they fall below 375,000, it suggests hiring is strong enough to lower the unemployment rate.
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