U.S. Durable-Goods Orders Probably Rose in December on Planes

U.S. Durable-Goods Orders Probably Rose in December on Planes

Jan. 29 (Bloomberg) -- Orders for U.S. durable goods rose in December for the first time in five months, led by a year-end jump in aircraft demand, economists said before a report today.

Bookings increased 1.6 percent, ending the longest decline since 2001, according to the median forecast in a Bloomberg survey. Excluding orders for transportation equipment, which tend to be volatile, demand was little changed following consecutive declines, signaling business investment was cooling.

Other reports today may show the decline in property values intensified and consumer confidence dropped to a two-year low. Federal Reserve policy makers, faced with mounting evidence of an economic slowdown, may lower interest rates again tomorrow and signal more cuts are likely, economists said.

``Momentum is headed down in capital expenditures and manufacturing,'' said Jonathan Basile, economist at Credit Suisse in New York. ``Tighter financial conditions are an impediment to business investment and that won't allow for the same amount of spending.''

The Commerce Department will issue the durable-goods report at 8:30 a.m. in Washington. Estimates ranged from a decline of 0.5 percent to a 6.0 percent gain.

Forecasts for bookings excluding transportation ranged from a 1.5 percent drop to an increase of 1.1 percent. Those orders fell 0.8 percent in November.

The other figures today may also reflect a weakening economy. Home prices in 20 U.S. metropolitan areas fell 7.1 percent in the 12 months to November, the most since record- keeping began in 2001, an index from S&P/Case-Shiller is forecast to show. The report is due at 9 a.m.

Less Confidence

Falling home values are undermining consumer confidence and spending power as Americans feel less wealthy and have less home equity to tap. The Conference Board will report at 10 a.m. that its consumer confidence index fell to 87 this month, the lowest since October 2005, according to economists surveyed.

Household purchases of cars and other large-ticket items are weakening. Americans bought about 16.1 million cars and light trucks in 2007, the fewest since 1998, as gasoline prices exceeded $3 a gallon and consumer confidence fell.

``The ripple effect of the housing downturn and a slowdown in motor-vehicle production has caused a significant hit to the overall manufacturing economy,'' David Huether, chief economist of the National Association of Manufacturers said last week.

Manufacturing contracted in December at the fastest pace in more than four years, according to a report from the Institute for Supply Management earlier this month. A measure of orders contracted at the fastest pace since the 2001 recession.

Weaker Growth

The factory slowdown at the end of 2007, combined with a cooling in business investment and the worsening housing slump, contributed to weaker growth last quarter, economists said.

The economy expanded at a 1.2 percent annual pace from October through December, compared with 4.9 percent in the previous three months, according to the median estimate of economists surveyed ahead of a report tomorrow.

One bright spot last month was demand for civilian aircraft. Boeing, the world's second-biggest airplane maker, received 287 orders in December, up from the 177 the prior month. Much of Chicago-based Boeings increase in bookings last year came from overseas.

Seven of the plane maker's 10-biggest customers whose identity was known last year were based abroad.

Faster growth outside the U.S. has led to record exports, helping American companies offset some of the slowdown in domestic demand, economists said. Shipments to overseas buyers in November set a ninth consecutive monthly record, the Commerce Department said earlier this month.

Growing Exports

United Technologies Corp., the maker of Otis elevators, Pratt & Whitney jet engines and Sikorsky helicopters, said Jan. 23 that fourth-quarter profit rose 23 percent as it benefited from overseas demand.

``The U.S. economy has slowed,'' Jeffrey Immelt, chief executive officer of General Electric Co., told investors earlier this month. ``Housing has been tough. The consumer's feeling some strain right now, but I would remind people that unemployment is still low and there's still good opportunities for export and we see that in our own businesses.''

On Jan. 18, GE said fourth-quarter profit rose 15 percent on higher international sales of jet engines and power-plant turbines, drawing more than half its annual revenue from overseas for the first time.

BLOOMBERG