U.S. Economy: Goods Orders, Home Sales Steadying
Orders for U.S. durable goods in March fell less than forecast and sales of new houses were higher than projected, signs the economic slump is easing.
Bookings for goods meant to last several years fell 0.8 percent last month, the Commerce Department said today in Washington. The median estimate of economists surveyed by Bloomberg News called for a 1.5 percent drop. New-home sales dipped 0.6 percent to a 356,000 annual pace after Commerce said the February reading was stronger than previously estimated.
“There’s a bottoming-out process going on here,” said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. “The numbers are still negative but not so negative as before. There’ll be a recovery in the second half, but it’ll be weaker than average.”
Federal Reserve and Obama administration efforts to unfreeze credit and stem foreclosures are just starting to pay off and will take additional time to revive growth. General Motors Corp. is among companies planning to idle plants in coming months in a sign the economy will not stop shrinking until the second half of the year.
The Fed today said the recession and market turbulence have “substantially reduced” reserves at some of the 19 largest U.S. banks, while most of the firms hold capital “well in excess” of regulatory standards. The report is part of a federal effort to restore public confidence in banks by gauging their capital strength. Final results of the tests are due the week of May 4.
Stocks Gain
Stocks paired gains in the minutes following the central bank’s report and then continued to climb. The Standard & Poor’s 500 index rose 1.7 percent to close up at 866.23. Companies from Ford Motor Co. to American Express Co. and Microsoft Corp. reported better-than-estimated results. Treasuries fell, pushing the yield on the 10-year note up to 2.99 percent at 4:38 p.m. in New York from 2.92 percent late yesterday.
Separately, finance chiefs from the Group of Seven nations predicted the world economy will start to rebound later this year as evidence mounts that the worst of the recession is over, according to the draft of a statement to be released after talks in Washington today.
“Recent data suggest that the pace of decline in our economies has slowed, and some signs of stabilization are emerging,” the G-7 finance ministers and central bankers said in the statement obtained by Bloomberg News.
February Revisions
The median estimate for the drop in durable goods orders was based on a survey of 68 economists that ranged from a 4.9 percent decline to an increase of 1 percent. The news was tempered by revisions to February figures that showed a 2.1 percent gain in orders, compared with a 3.4 percent increase the government previously reported.
Commerce revised the level of new-home sales for February up to a 358,000 annual rate from the 337,000 estimate reported last month payday loan help.
The Commerce durable-goods report’s gauge of future business investment climbed for a second month in March, while the figures tracking the current state of the economy dropped. That decrease prompted economists at Morgan Stanley in New York to lower their estimate for first-quarter gross domestic product to a decline of 5.2 percent at an annual pace, more than previously projected.
“The economy is still contracting, but at a substantially slower pace,” said Robert Mellman, an economist at JPMorgan Chase & Co. in New York. “The fiscal stimulus, government income support and what the Fed is doing are all pretty important.” JPMorgan projects the economy will begin to grow in the second half of the year, Mellman said.
GM, Boeing
General Motors is planning on idling 13 plants for multiple weeks from May through July, and other companies may keep cutting spending and slashing jobs until demand here and abroad shows sustained gains.
Boeing Co., the world’s second-largest commercial-jet builder, this week lowered its 2009 profit forecast while reaffirming its full-year delivery schedule. The Chicago-based company got 28 new orders through March and had 32 cancellations. Carriers deferred deliveries by one to two years on 60 planes that were scheduled for production in 2010 and 2011, Boeing said.
The Commerce Department’s report on sales of new houses also showed the median price decreased 12 percent from March 2008, to $201,400, the lowest level since December 2003. Inventories of unsold homes fell to a seven-year low, showing builders are making headway in eliminating the glut.
Western Surge
Sales in March were led by a 15 percent surge in the West. Purchases plunged 32 percent in the Northeast. They were also down in the Midwest and were little changed in the South.
A report from the National Association of Realtors yesterday showed purchases of existing homes in March fell 3 percent to an annual rate of 4.57 million. Distressed properties accounted for about 50 percent of all sales, and purchases by first-time buyers climbed to 51 percent of the total, the group said.
KB Home, the Los Angeles-based homebuilder that is focusing on first-time buyers, is among companies seeing signs of improvement. The company last month reported a narrower first- quarter loss as orders increased for the first time in three years.
Still, analysts project an economy that has hemorrhaged 5.1 million jobs since December 2007 and consumer confidence near record lows means sales are likely to stabilize rather than rebound.