Hesitant about the shaky economy, American businesses are cutting back on investments and equipment. And the housing industry, in its worst crisis since the early 1990s, is poised for several months of anemic sales.
Government reports released Wednesday reinforced concerns that the economy was facing severe headwinds.
“Businesses are reluctant to invest because they still have no clue about how the economy is going to shake out over the next six to 12 months,” said Bernard Baumohl, managing director of the Economic Outlook Group, a forecasting firm in Princeton, N.J.
Home builders are equally flummoxed. As buyers vanish, residential construction companies are slashing prices on unsold homes. In January, the median price of a new home fell to $216,000, down 15 percent from the previous January, according to the Commerce Department.
But the discounts failed to fan interest. Last month, sales of new homes slowed to an annual rate of 588,000, the lowest in almost 13 years. It was the third consecutive monthly decline, and 2.8 percent below the sales rate in December.
“Another month, another disastrous U.S. new-home sales report,” an economist at ING Bank, Dimitry Fleming, wrote. “New home prices have not dropped this fast in over 35 years.”
In an ominous sign for builders, inventories of unsold new homes continued to rise. At the current rate, it would take nearly 10 months to sell the backlog.
“Prices will need to fall further to help clear the market,” said Joshua Shapiro, the chief United States economist at MFR, a research firm. Would-be buyers are waiting for better deals, say economists, who predict that sales will remain light through at least the summer.
Sales have gone south amid a wave of foreclosures and more stringent lending standards for mortgages. The number of new homes on the market in January dropped as well.
Toll Brothers, a leading luxury builder, said on Wednesday that first-quarter sales fell 23 percent, leading to a $96 million loss. The company was forced to write down $245 million in unsold properties, double the amount from a year ago.
“Ceaseless talk of a recession continues to dampen the mood of consumers in general, whether or not a recession actually occurs,” the company’s chief executive, Robert I. Toll, said in a statement. “We believe that revived buyer confidence is paramount to getting the market moving again.”
In January, sales of new homes fell 10.3 percent in the Northeast; 7.6 percent in the Midwest; and 2.4 percent in the South. Sales rose 2.2 percent in the West.
The weak housing data coincided with new evidence of other economic troubles. A separate Commerce Department report showed that businesses spent less on durable goods in January, a sign that companies were hesitant to make large purchases.
Over all, new orders of durable goods — those that last for several years — fell 5.3 percent last month, dragged down by a sharp drop in transportation goods like aircraft. It was the first monthly decline since October.
“It falls in with a lot of other economic indicators that are pointing to a weakening in the economy,” Mr. Baumohl, of the Economic Outlook Group, said of durable goods. “That’s the only way you can really portray it.”
Japan’s Factory Output Falls
TOKYO (Bloomberg News) — January factory production in Japan fell twice as much as economists had predicted as manufacturers anticipated a deepening slump in the United States would weaken demand.
Companies cut output 2 percent from December, when it rose 1.4 percent, the trade ministry said Thursday.
A separate report showed retail sales increased 1.5 percent in January from a year earlier, though most of the gain was driven by higher gasoline prices. (c) NYT
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