Sunday, April 19, 2009

Goods Orders, Home Sales Probably Fell: U.S. Economy Preview

Orders for U.S. durable goods and home sales probably retreated in March after rebounding the previous month, showing any economic recovery will be slow to develop, economists said before reports this week.

Bookings for goods meant to last several years fell 1.5 percent, the fifth drop in six months, according to the median forecast in a Bloomberg News survey ahead of a Commerce Department report April 24. Combined sales of new and existing homes likely decreased to a 5.02 million annual rate, down from a 5.06 million pace in February, other figures may show.

Companies may not invest in new equipment nor add to payrolls until sales here and abroad show sustained gains and government efforts to stem the recession take hold. Record foreclosures are adding to the glut of properties on the market, leading to a drop in values that helps stabilize sales even as it hurts builder profits.

“It’s not a good environment for capital spending,” said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. “Housing doesn’t seem to be getting worse, which is good, because you’ve got to crawl before you can walk.”

A decline in orders for durable goods would follow a 3.5 percent jump in February. The Commerce Department’s report may also show bookings excluding transportation equipment dropped 1.2 percent last month, according to the Bloomberg survey.

Auto Slump

Automakers continue to struggle. General Motors Corp., operating with $13.4 billion in U.S. loans, will probably still need $4.6 billion in additional aid this quarter, Chief Executive Officer Fritz Henderson said last week. GM will file for bankruptcy protection unless it can restructure out of court by June 1, he said.

Other manufacturers also are hurting. General Electric Co., the world’s biggest supplier of power-plant turbines, jet engines and private-label credit cards, last week said its first-quarter profit fell 35 percent. The Fairfield, Connecticut-based company was hurt by real-estate losses, rising consumer-credit defaults, and slumping demand for medical equipment.

“The global environment remains challenging,” Chief Executive Officer Jeffrey Immelt told investors on an April 17 conference call. “While we’re seeing some positive indicators globally, we continue to be cautious.”

Sales of existing houses, which account for 90 percent of the market, fell in March to a 4.68 million annual rate, from a 4.72 million pace the prior month, the survey median showed. The National Association of Realtors’ report is due April 23.

New Houses

A day later, Commerce Department figures may show new-home sales rose 0.9 percent to a 340,000 annual rate, the second month of gains, according to the survey median.

“Housing markets remained depressed overall, but there were some signs that conditions may be stabilizing,” including an increase in “potential buyers,” the Fed said in its Beige Book regional business survey released April 15.

The Labor Department’s initial jobless claims report this week, due April 23, may garner even more attention than usual. The Bloomberg survey median shows more Americans probably applied for unemployment benefits in the week ended yesterday.

First-time claims unexpectedly fell the prior week to the lowest level since January, Labor figures on April 16 showed. Another drop would be an “important sign that the labor market may be on a path to gradual recovery,” JPMorgan’s Feroli said.

Federal Reserve Chairman Ben S. Bernanke last week said the economy’s “sharp decline” may be slowing, and President Barack Obama cited “glimmers of hope” as the stimulus package and policy measures start to take hold.

Finally, a report from the New York-based Conference Board tomorrow may show its gauge of leading indicators, which points to the direction of the economy over the next three to six months, declined 0.2 percent in March after a 0.4 percent drop the prior month, according to economists surveyed.