Hurting economy shows new signs of life

By Martin Crutsinger

WASHINGTON – After weeks of one negative report after another, the economy finally got some news Friday that wasn’t half bad.

Wall Street, which suffered a stomach-churning drop Thursday, managed a modest gain. Oil prices hit their lowest point since early June, and gas fell to a seven-week low. Military spending helped boost big-ticket factory orders in June, and new home sales fell less than expected.

Still, private economists cautioned that a few better-than-expected data releases did not mean the economy’s problems had disappeared.

The Commerce Department reported that a second straight double-digit increase in orders for defense capital goods had pushed total orders for big-ticket manufactured products up by 0.8 percent in June, the strongest gain in four months and much better than the 0.4 percent decline that economists had been expecting.

In a second report, Commerce said that sales of new homes dropped by 0.6 percent in June, less than half the decline that had been expected. May sales were revised to show more strength than originally thought, although, they were still down. New home sales have fallen in seven of the past eight months as the nation endures the steepest slump in housing in a generation.

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    But economists were encouraged that the pace of the decline has slowed significantly and two regions of the country – the Northeast and the Midwest – actually posted sales gains in June. Sales fell in the South and West. The inventory of unsold new homes also fell to a 10-month supply at the June sales pace, still high, but down from the peak of 11.2 months in March.

    Brian Bethune, chief U.S. financial economist at Global Insight, said despite the positive flickers in the housing report, “the housing market remains extremely fragile.”

    Evidence of that came in a separate report showing that the number of households facing foreclosure more than doubled in the second quarter, compared to a year ago. Nationwide, 739,714 homes received at least one foreclosure-related notice during the quarter, or one in every 171 U.S. households, according to Irvine, Calif.-based RealtyTrac Inc.

    Wall Street, which had plunged by more than 280 points Thursday following news that existing home sales had dropped more than expected in June, chose to be more optimistic Friday. The Dow Jones industrial average rose by 21.41 points to finish a volatile week at 11,370.69.

    On the energy front, oil prices declined $2.23 settling at $123.26 a barrel on the New York Mercantile Exchange on Friday as gas prices dipped to $4.006 per gallon, the first time pump prices have been that low in nearly seven weeks, according to a survey by AAA, the Oil Price Information Service and Wright Express.

    AAA spokesman Geoff Sundstrom said prices at the pump should slip below the $4 mark during the weekend and could drop by at least another 25 cents by Labor Day, if oil stays on its downward path. However, analysts said it was too early to tell whether the decline was here to stay.