U.S. durables orders and home sales skid lower

By Glenn Somerville WASHINGTON (Reuters) - Orders for long-lasting U.S. manufactured goods and sales of new homes plunged in August while jobless claims shot up last week, according to reports on Thursday that showed the economy rapidly weakening. A day after U.S. President George W. Bush warned of economic disaster if Congress didn't approve his bailout of the financial system, the Commerce Department said new orders for durable goods such as new cars and refrigerators slumped a sharper-than-expected 4.5 percent. That was the biggest monthly drop this year, as demand for nearly every major category of manufactured item softened. Separately, the department said sales of new single-family homes slumped 11.5 percent last month from July to an annual rate of 460,000, the slowest rate since 1991. The median sales price fell 5.5 percent to $221,900 (120,000 pounds), the lowest in nearly four years. In a televised address on Wednesday to build support for the sweeping bailout, Bush blamed the housing market bust for the economy's woes, and there was one sign that progress was being made. The number of new homes for sale at the end of August fell to 408,000, lowest in four years. Analysts say prices must decline further to shrink inventories of new homes on the market. At August's slack sales pace there still was 10.9 months' worth of homes for sale, little changed over the past five months. Investors looked past the wave of bad economic news and drove stock prices higher on a surge of optimism as lawmakers moved with uncharacteristic speed towards approval of a massive bailout package for financial firms weighed down by bad debt. Members of the U.S. House of Representatives and Senate were working on details of a plan for disbursing $700 billion in stages to the Treasury Department to purchase illiquid assets in a bid to unclog barely functioning credit markets. The Dow Jones industrial average .DJI ended up 196 points at 11.022 after being up nearly 300 at one point while the Nasdaq Composite Index .IXIC rose 30 points to 2,186. The dollar rose against the euro and yen, buoyed by the robust stock gains. Housing market conditions currently are considered the worst since the Great Depression and, on Wednesday, Federal Reserve Chairman Ben Bernanke told Congress the economy was rapidly losing momentum. "Economic activity appears to have decelerated broadly," the Fed chief said. He urged lawmakers to quickly approve a bailout package and warned conditions would get worse if they did not do so. The Labour Department said new claims for jobless benefits jumped 32,000 last week to a seasonally adjusted 493,000, though it was primarily because of the impact of hurricanes Ike and Gustav. The department estimated that about 50,000 of last week's claims were caused by the hurricanes so some of those jobs may be restored when businesses resume operations. Analysts said the data only reinforced a widespread impression that economic activity is fading in the second half of the year, perhaps more severely than anticipated. "The durable goods and jobless claims data that just came out this morning are certainly on the weak side, which is not totally unexpected given the fact the economy is likely to weaken somewhat during the second half," said Michael Sheldon, chief market strategist for RDM Financial in Westport, Connecticut. Economist Cary Leahey of Decision Economics Inc in New York, said prospects for orders were bleak. "Unfortunately, the tightening of bank credit, according to the Federal Reserve, would point to declines in capital spending of 15 percent to 20 percent from here," Leahey said. "This is very sobering and will provide additional ammunition to those who say a bailout bill is needed to protect not only Wall Street, by the man on the street." Excluding transportation, August durables orders were down 3 percent after edging up 0.1 percent in July. The fall in orders excluding transportation was the steepest since the beginning of 2007. Last week's jobless claims total was the highest since September 29, 2001, in the aftermath of terror attacks on New York and Washington. Companies have cut their payrolls every month this year and joblessness is expected to worsen, with many economists saying the United States may already be in recession. Transportation orders tumbled 8.9 percent in August after rising 2.8 percent in July. Non-defence capital goods excluding aircraft, seen as a barometer of business spending plans, were down 2 percent after increasing by 0.4 percent in July. (Additional reporting by Alister Bull in Washington and Ellen Freilich in New York; Editing by Neil Stempleman) ʘ