Durables Orders, Home Sales Probably Rose: U.S. Economy Preview

Durables Orders, Home Sales Probably Rose: U.S. Economy Preview


Feb. 21 (Bloomberg) -- Orders for durable goods probably rose in January by the most in four months and home sales showed more signs of stabilizing, indicating manufacturing is driving the U.S. recovery, economists said before reports this week.

Bookings for goods meant to last several years rose 1.5 percent last month after a 1 percent gain, according to the median estimate of 48 economists surveyed by Bloomberg News. Combined sales of new and existing homes rose 1.1 percent to a 5.86 million annual pace, other reports may show.

Factories will probably ratchet up production to replenish inventories and meet global demand for new equipment made by companies such as Caterpillar Inc. Further gains in home sales will depend on how Americans respond to tax incentives and how soon the economy starts to create jobs.

“Manufacturing is coming back pretty solidly and there is some strength in capital spending,” said Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina. “Housing is definitely a laggard. Until we get job growth and lending eases up, we’re not going to get a whole lot of lift.”

Federal Reserve Bank of New York President William Dudley last week indicated policy makers are more concerned about maintaining growth than they are about immediate inflation threats. Fed Chairman Ben S. Bernanke may deliver a similar message to Congress Feb. 24-25 during his semi-annual report on the economy and interest rates.

Durable Goods

The Commerce Department’s durable goods report is due Feb. 25 in Washington. Estimates in the Bloomberg survey ranged from a decline of 0.5 percent to a gain of 5 percent.

Excluding demand for transportation equipment, which tends to be volatile month to month, orders probably increased 0.9 percent after rising 1.4 percent in December.

Manufacturing, which accounts for 12 percent of the economy, expanded in January at the fastest pace since August 2004, according to the Institute for Supply Management’s factory index released Feb. 1.

Spending on equipment and software rose at a 13.3 percent annual pace in the fourth quarter, the fastest since 2006, the Commerce Department said in its initial estimate of gross domestic product on Jan. 29.

The economy probably grew at a 5.7 percent annual rate from October through December, according to the median survey of economists before the Commerce Department’s first revision to the figures on Feb. 26.

With manufacturing and the economy expanding, the Standard & Poor’s Supercomposite for industrial machinery is up 2.2 percent so far this year, compared with a 0.5 percent decline in the broader S&P 500 Index.

Recalling Workers

Some manufacturers are also beginning to bring back workers or hire. Caterpillar, the world’s largest maker of bulldozers and excavators, is recalling about 100 laid-off technicians at an Indiana plant because of increased demand and may be hiring more, Bridget Young, a Caterpillar spokeswoman, said Feb. 18.

“Caterpillar may be recalling or hiring employees in business units at various facilities this year based on demand fluctuation,” Young said.

Factories added 11,000 workers to payrolls in January, the first increase in three years and the most since April 2006, the Labor Department said on Feb. 5. Overall, payrolls declined by 20,000, and the unemployment rate fell to 9.7 percent.

Housing, the industry that spawned the subprime meltdown that triggered the worst recession in seven decades, began to recover last year after a three-year decline. Sustained growth depends on how much demand the tax credit will spur and renewed job creation after 8.4 million job losses in the last two years.

Existing Homes

Sales of existing homes probably rose 0.9 percent in January to a 5.5 million annual rate, according to the median estimate of economists surveyed by Bloomberg before the Feb. 26 report from the National Association of Realtors.

Another report from the Commerce Department on Feb. 24 will show new-home sales rose 3.8 percent to a 355,000 rate last month, according to the median estimate of economists surveyed.

Sales of previously owned homes have risen 21 percent from their historic lows in January 2009, while new-home purchases have risen 4 percent. Existing-home sales have been driven by record distressed sales, which pulled down prices and accounted for 36 percent of purchases last year, according to NAR chief economist Lawrence Yun.

Home sales fell in December following the expected expiration of an $8,000 first-time homebuyers’ tax credit in November that had driven demand in previous months. The credit, expanded to include some current homeowners, has been extended for contracts signed through April and closed by June 30.

Home Prices

Housing prices continue to decline, though at a diminishing pace. The S&P/Case Shiller home price index of 20 major cities will probably show home prices fell 3 percent in December from a year earlier, the smallest decline in more than two years, according to the median estimate of economists surveyed before that report on Feb. 23. Home values are 29 percent below their July 2006 peaks.

An absence of job growth is limiting optimism even as the economy expands. The Conference Board may report Feb. 23 that consumer confidence this month fell to 55 from 55.9 in January, according to the median estimate of economists surveyed. Confidence averaged 105 in the 12-month period before the recession began in December 2007.

The final Reuters/University of Michigan consumer sentiment index may fall to 74 in February from 74.4 at the end of January, that index may show on Feb. 26, economists forecast.



Bloomberg Survey

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Release Period Prior Median
Indicator Date Value Forecast
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Case Shiller MOM 2/23 Dec. 0.2% 0.1%
Case Shiller YOY 2/23 Dec. -5.3% -3.0%
Consumer Conf Index 2/23 Feb. 55.9 55.0
New Home Sales ,000’s 2/24 Jan. 342 355
New Home Sales MOM% 2/24 Jan. -7.6% 3.8%
Initial Claims ,000’s 2/25 13-Feb 473 458
Durables Orders MOM% 2/25 Jan. 1.0% 1.5%
Durables Ex-Trans MOM% 2/25 Jan. 1.4% 0.9%
GDP Annual QOQ% 2/26 4Q P 5.7% 5.7%
Chicago PM Index 2/26 Feb. 61.5 59.0
U of Mich Conf. Index 2/26 Feb. F 73.7 74.0
Exist Homes Mlns 2/26 Jan. 5.45 5.50
Exist Homes MOM% 2/26 Jan. -16.7% 0.9%
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source: bloomberg