US economic data looks better on closer inspection

WASHINGTON (AP) — At first glance, a batch of US economic data released Thursday looked dispiriting. Companies slashed orders for factory goods. The government cut its most recent growth estimate. And fewer people signed contracts to buy homes.

Yet a peek beneath the headlines, and a separate report on applications for unemployment aid, suggested that the economy is sturdier than it might appear.

“Don’t panic,” Paul Ashworth, chief US economist at Capital Economics, said in a research note.

The data released Thursday showed that:

• Companies cut orders for long-lasting goods by 13.2 percent in August. The drop reported by the Commerce Department was the steepest in more than three years, but it was caused mainly by a plunge in volatile aircraft orders. Excluding transportation equipment, orders fell just 1.6 percent. And a category that reflects business investment plans rose 1.1 percent — its first increase since May.

• The economy grew at a scant 1.3 percent annual rate in the April-June quarter. That was down from the 1.7 percent rate the government had previously estimated. But the downward revision was due largely to the Midwest drought, which cut farm production. Once the drought eases and crop yields rebound, US farms should boost growth, Ashworth noted.

• The number of Americans who signed contracts to buy previously occupied homes fell in August from a two-year high in July. The National Association of Realtors said its index of sales agreements declined to 99.2, just below the reading of 100 that’s considered healthy. Still, the index is 10.7 percent higher than a year ago.

Investors appeared to shrug off the reports and focused instead on Spain’s plan to slash its budget to show it can meet deficit-reduction targets. The Dow Jones industrial average closed up 72 points. Broader stock indexes also rose.

While the economy looks sturdier than some feared, it’s being slowed by chronically high unemployment and stagnant wages. Those weaknesses represent risks to President Barack Obama in his re-election race against Mitt Romney. The economy will be the focus of Wednesday’s presidential debate, the first of three debates before the Nov. 6 election.