Economists agreed yesterday that pressure continues to mount for a drop in interest rates, as new economic data suggest that the nation remains stuck in a weak economic recovery.
Factory orders dropped for their second consecutive month, the Commerce Department reported yesterday, declining 1.7 percent in September. Analysts had expected a drop of 1.4 percent.
The drop suggests wholesalers and retailers continue to maintain low inventory levels as they await a rebound in consumer confidence. In August, factory orders fell a revised 2.0 percent.
"Wholesalers and retailers have made it no secret that they want to keep lean inventories," said Mark Vitner, an economist with Barnett Banks Inc., in Jacksonville, Fla.
In contrast with the weak factory order report, the Labor Department said that the number of Americans filing new claims for unemployment benefits fell sharply by 47,000 in the week that ended Oct. 19.
It was the lowest number of new claimants for a week since early September and the largest one-week decline since the end of March. Analysts, however, said the figure can be volatile from week to week.
The mixed news means the economy could use a boost, said Stan Geberer, an economist with Fishkind & Associates in Orlando. "I think it should be important to lower rates before the end of the year," he said.
"We are certainly optimistic that this is a recovery," he said. "But this is certainly not the skyrocketing recovery that we saw in 1983 and 1984, when record numbers of jobs were produced."
The administration confirmed yesterday that the Federal Reserve, the nation's central bank, has responded by pushing its federal funds rate -- the rate banks charge to borrow from each other -- down to 5 percent. The Fed's previous target was 5.25 percent.
Because the Fed does not announce changes in its lending rates, some economic analysts have speculated that technical actions by the central bank have been mistaken for a rate reduction.
Mr. Vitner said that a more dramatic move would be a drop in the discount rate, which the Fed uses to charge banks for loans.
Meanwhile, the National Association of Realtors reported yesterday that national median home price fell $2,400, to $99,800, from August to September. The median was still $5,400 above its level in September 1990.
Surveys continue to suggest that pessimism remains about the economy.
The National Association of Purchasing Management, which tracks the economy through a monthly survey of its members, said yesterday that its index of business activity fell to 53.5 percent last month from 55 percent in September. When the index exceeds 50 percent, it indicates the manufacturing economy is expanding, but the fact that the barometer fell in October indicates the sector is growing at a slower pace.