Orders for durable goods fall

WASHINGTON — New orders for long-lasting U.S.-made manufactured goods dropped at the sharpest rate in seven months during August, according to a government report that added to signs that growth was slowing in the third quarter.

Durable goods orders overall plummeted 4.9% in August, Commerce Department data showed, with declines in nearly every major category.

The fall was steeper than the 3.1% decline Wall Street economists had forecast, but followed an upwardly revised 6.1% increase in July that left analysts confident that the economy was not headed into a precipitous decline.

“The notion the economy is in free fall because of the housing market slowdown is not being validated by these numbers,” said Peter Kenny, managing director at Knight Equity Markets in Jersey City, N.J.

Analysts are watching whether problems in U.S. sub-prime mortgage markets that other nations in Europe and elsewhere say are affecting them will pull U.S. and global growth down. U.S. housing data this week showed the industry remained under pressure.

Richard Huber, an economist with A.G. Edwards and Sons Inc. in St. Louis, said that although it appeared that growth was slowing, there was no evidence yet to support a view that it might deteriorate into a more serious downturn.

“All the data coming out seem to support the conclusion that the third quarter will just be a slow-growth quarter -- neither recessionary nor the above-trend growth that we had in the second quarter,” Huber said.

But down the road, economist Joseph Brusuelas of IDEAglobal in New York said, the manufacturing sector will suffer if business investment keeps weakening.

Nondefense capital goods orders excluding aircraft -- a proxy for business spending -- fell 0.7% in August after a 0.9% gain in July.

The government’s monthly durable goods report is volatile and subject to substantial revisions, but the August report was striking because the declines were so widespread.

Even excluding transportation, orders fell 1.8% after rising 3.4% in July.

The drops in overall orders and in orders excluding transportation both were the steepest since January, when they fell 6.1% and 3.1%, respectively.

Excluding defense, orders of durable goods fell 5.9% in August, more than reversing a 4.7% gain in July.

A separate report underlined the depth of the problem in U.S. mortgage markets as applications for new loans fell last week after climbing for three straight weeks.

The Mortgage Bankers Assn. said its index of mortgage application activity dropped 2.8% in the week ended Sept. 21 as a decline in demand for home purchase loans overshadowed a fourth consecutive rise in refinancing requests

Weaker demand for applications to buy homes is consistent with other reports finding sales and prices slumping to multiyear lows.

Existing-home sales sank in August to a five-year low while the supply of unsold single-family houses ballooned to an 18-year high, the National Assn. of Realtors said Tuesday.