Durable Goods Orders Probably Climbed: U.S. Economy Preview
March 21 (Bloomberg) -- Orders for long-lasting goods in the U.S. probably climbed in February for a third month, and home sales were little changed, adding to evidence manufacturing is heading the recovery, economists said before reports this week.
Bookings for durable goods rose 0.5 percent, according to the median of 63 estimates in a Bloomberg News survey ahead of a Commerce Department report March 24. Combined sales of new and existing homes last month likely fell 1.2 percent to an annual rate of 5.3 million, the survey showed.
Business equipment spending, inventory restocking and a pickup in global demand are generating production gains that may help other parts of the economy accelerate. Sustained gains in employment are the missing element needed to further broaden the expansion by boosting consumer spending and housing.
“Manufacturing is leading the recovery, while housing is clinging to stability,” said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. “An improving labor market will be key to the outlook.”
Federal Reserve policy makers, at their meeting last week, said economic growth “is likely to be moderate for a time.” While the labor market has stabilized, “employers remain reluctant to add to payrolls,” the Fed said in announcing the benchmark overnight bank lending rate would remain near zero.
The projected rise in durable goods orders would follow a 2.6 percent jump in January that was the biggest since July 2009. Excluding transportation equipment, which includes demand for commercial aircraft that tends to be volatile, orders rose 0.6 percent after a 1 percent decline the prior month, according to the survey.
Boeing Orders Rise
Boeing Co., the world’s second-biggest commercial-plane maker, said it received 47 orders in February, up from 10 a month earlier. Chicago-based Boeing last week said it will boost production in coming years to meet stronger demand as airlines rebound from the recession-induced travel slump.
The rebound in manufacturing has boosted shares of machinery makers this year. The Standard & Poor’s Supercomposite Industrial Machinery Index of 36 companies, including Eaton Corp. and Briggs & Stratton Corp., has increased 6.8 percent this year compared with a 4 percent gain in the broader S&P 500.
Growing sales in the U.S. and abroad and the need to replenish inventories are also helping companies such as Owens- Illinois Inc., the largest U.S. maker of glass containers for food and beverages.
Sustained Recovery
“We are starting to see the beginnings of a recovery, which we anticipate will extend through 2010 and 2011,” Chief Executive Officer Al Stroucken said in a presentation to investors on March 18. Stroucken said he expects “volumes to recover due to destocking having run its course.”
Stronger business investment and a bigger contribution from efforts to stabilize inventories helped the economy expand in the fourth quarter at the fastest pace in six years. Gross domestic product probably grew at a 5.9 percent annual rate, with consumer spending increasing at a 1.7 percent pace, according to the median survey estimate before revised figures from the Commerce Department on March 26.
Homebuilding contributed less to growth in the final three months of 2009 than in the third quarter as sales slowed. Fed policy makers in their March 16 statement described home construction as “flat at depressed levels.”
With the recovery in credit markets, the Fed is moving forward at the end of this month with plans to halt a program to buy $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt that was aimed at keeping borrowing costs low.
Buyer Credit
Another means of support for housing, the homebuyer tax credit that President Barack Obama extended and expanded in November, has been slow to rekindle demand. The program covers closings through June as long as contracts are signed by the end of April.
Sales of previously owned homes fell 1.4 percent in February to a 4.98 million-unit pace, according to the survey ahead of the National Association of Realtors’ report on March 23.
A report on purchases of new houses, due the following day from the Commerce Department, may show a gain of 1.9 percent to a 315,000 rate last month, according to the survey median. They slumped to a record-low 309,000 pace in January.
Housing demand may be restrained by an unemployment rate that’s projected to end the year at 9.5 percent, according to a monthly Bloomberg survey. Economists predict Labor Department figures on March 25 may show first-time claims for jobless benefits fell by 7,000 to 450,000 last week.
A lack of job growth is also weighing on consumer confidence, a report may show on March 26. The Reuters/University of Michigan final index of consumer sentiment fell in March for a second month, according to the median estimate in a Bloomberg survey.
Bloomberg Survey
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Release Period Prior Median
Indicator Date Value Forecast
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Exist Homes Mlns 3/23 Feb. 5.05 4.98
Exist Homes MOM% 3/23 Feb. -7.2% -1.4%
FHFA HPI MOM% 3/23 Jan. -1.6% -0.9%
Durables Orders MOM% 3/24 Feb. 2.6% 0.5%
Durables Ex-Trans MOM% 3/24 Feb. -1.0% 0.6%
New Home Sales ,000’s 3/24 Feb. 309 315
New Home Sales MOM% 3/24 Feb. -11.2% 1.9%
Initial Claims ,000’s 3/25 20-Mar 457 450
Cont. Claims ,000’s 3/25 13-Mar 4579 4560
GDP Annual QOQ% 3/26 4Q F 5.9% 5.9%
Personal Consump. QOQ% 3/26 4Q F 1.7% 1.7%
GDP Prices QOQ% 3/26 4Q F 0.4% 0.4%
Core PCE Prices QOQ% 3/26 4Q F 1.6% 1.6%
U of Mich Conf. Index 3/26 March F 73.6 73.0
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source: bloomberg.com
