By Glenn Somerville
WASHINGTON (Reuters) - Orders for costly U.S. manufactured goods plunged in August and new-home sales hit a 17-year low, while new claims for jobless benefits shot up last week, according to government reports on Thursday that showed the economy rapidly weakening.
The Commerce Department said new orders for durable goods like new cars and refrigerators slumped a sharper-than-expected 4.5 percent, the biggest monthly drop this year, as demand for nearly every major category of manufactured item softened.
Separately, the department said sales of new single-family homes slumped 11.5 percent last month from July's level to an annual rate of 460,000 and the median sales price fell 5.5 percent to $221,900 -- lowest in nearly four years.
A housing correction is at the heart of the economy's woes and analysts say prices will have to keep dropping before inventories are drawn down and markets stabilize.
On Wednesday, Federal Reserve Chairman Ben Bernanke told Congress the economy was rapidly losing momentum. He urged lawmakers to quickly approve a bailout package to buy bad assets from financial firms to try to free up credit markets and ease economic pain.
"Economic activity appeared to have decelerated broadly," the Fed chief said.
The Labor Department said new claims for jobless benefits jumped 32,000 last week to a seasonally adjusted 493,000, though it was primarily because of the impact of hurricanes Ike and Gustav.
The department estimated that about 50,000 of last week's claims were caused by the hurricanes so some of those jobs may be restored when businesses are able to resume operating.
Analysts said the data only reinforced a widespread impression that economic activity is fading in the second half of the year, perhaps more severely than anticipated.
"The durable goods and jobless claims data that just came out this morning are certainly on the weak side, which is not totally unexpected given the fact the economy is likely to weaken somewhat during the second half," said Michael Sheldon, chief market strategist for RDM Financial in Westport, Connecticut.
Economist Cary Leahey of Decision Economics Inc. in New York, said prospects for orders going forward were bleak.
"Unfortunately, the tightening of bank credit, according to the Federal Reserve, would point to declines in capital spending of 15 percent to 20 percent from here," Leahey said. "This is very sobering and will provide additional ammunition to those who say a bailout bill is needed to protect not only Wall Street, by the man on the street."
Excluding transportation, August durables orders were down 3 percent after edging up 0.1 percent in July. The fall in orders excluding transportation was the steepest since the beginning of 2007.
Last week's jobless claims total was the highest since September 29, 2001, in the aftermath of terror attacks on New York and Washington. Companies have cut their payrolls every month so far this year and joblessness is expected to worsen, with many economists saying the United States may already be in recession.
The U.S. dollar slipped after the weak housing data, but later pared losses to stand little changed on the day.
Stock prices at mid-morning were sharply higher, primarily on hope that Congress was nearer granting approval for a bailout program after wringing pledges from the Bush administration that it will include measures to limit pay for executives of firms able to sell bad assets to the government and that taxpayers will get an equity stake in the companies.
Transportation orders tumbled 8.9 percent in August after rising 2.8 percent in July. Non-defense capital goods excluding aircraft, seen as a barometer of business spending plans, were down 2 percent after increasing by 0.4 percent in July.
(Additional reporting by Alister Bull in Washington and Ellen Freilich in New York; Editing by Andrea Ricci)
