Economic reports offer no good news
WASHINGTON - The US economy ended the year in a steep decline, with factory orders, home sales, and service industries all contracting further, reports showed yesterday.
The Institute for Supply Management's index of nonmanufacturing businesses was 40.6 for December, a higher-than-forecast reading that was still the second-worst on record. The National Association of Realtors index of pending home resales fell 4 percent in November, and the Commerce Department said orders at factories slumped for a fourth month.
The data show the broad-based nature of the slump and may put pressure on Congress to quickly enact President-elect Barack Obama's stimulus plan. With little prospect of growth in private demand, a turnaround may hinge on the tax and spending proposals Obama is aiming at middle-class households and at businesses.
"The economy fell off a cliff in the fourth quarter and is most likely still falling," said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Conn. "We do expect some stabilization by mid-year, partly because of Obama's plan" and partly because of the Federal Reserve's interest-rate cuts and emergency lending programs.
The ISM's index was projected to decline to 36.5, according to the median forecast in a Bloomberg News survey of 61 economists. The group said last week that its gauge of manufacturing fell to 32.4 in December, from 36.2 the previous month. Below 50 indicates a contraction.
"I don't anticipate us seeing growth any time soon," said Anthony Nieves, chairman of the ISM's nonmanufacturing survey.
"Many companies may have been waiting until after the holiday season" before paring their workforces. "We might even see deeper job cuts as we move into the first quarter."
Obama met Monday with congressional leaders to help craft a two-year plan worth about $775 billion to boost the economy. He said the plan would cut taxes for individuals and businesses and spend money on government programs to rebuild the nation's infrastructure.
The home-sales report showed declines of 7.2 percent in the Northeast, 6.7 percent in the Midwest, 2.4 percent in the West, and 2.2 percent in the South.
Orders to US factories fell 4.6 percent in November after a revised 6 percent decrease the prior month that was larger than initially estimated, the Commerce Department said. The back-to-back decline was the biggest since records began in 1992.
The bad news probably continued last month. ISM's manufacturing report, issued last week, showed the measure of new orders reached its lowest level since record-keeping began in 1948, and prices slid the most since 1949.
The economy lost jobs in December for a 12th month, economists project that the Labor Department's Jan. 9 employment report will show. 