Sunday, May 24, 2009

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

Orders for durable goods and home sales probably rose in April as the worst U.S. recession in at least half a century started to loosen its grip, economists said before reports this week.

Bookings for goods meant to last several years increased 0.4 percent, the second gain in three months, according to the median forecast in a Bloomberg News survey ahead of a Commerce Department report May 28. Combined sales of new and existing homes likely advanced to a 5.02 million annual rate from a 4.93 million pace in March, other figures may show.

Stabilization in housing and manufacturing, the two areas suffering the biggest contractions, will help ease the economic slump. Still, gains will be difficult to sustain in coming months as banks remain hesitant to lend and unemployment climbs, underscoring projections from Federal Reserve officials and private economists that a recovery will be subdued.

“Evidence that the 16-month recession is coming to an end continues to build,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “Home sales and building activity seem to be stabilizing and manufacturing surveys point to smaller production cuts and smaller job losses.”

An increase in orders for durable goods would follow a 0.8 percent drop in March. The Commerce Department’s report may also show bookings excluding transportation equipment fell 0.3 percent last month, according to the Bloomberg survey.

Orders Steady

United Technologies Corp., the maker of Pratt & Whitney jet engines and Carrier air conditioners, last week maintained its profit forecast for the year as order rates stabilized across its divisions since March.

There are some “early signs” of price stabilization in some markets, Chief Executive Officer said Louis Chenevert at a conference May 19, citing benefits from stimulus programs in the U.S. and in China for the Carrier and Otis divisions. Demand at the commercial and business jet aerospace units may have peaked in 2008 and will take several years to recover, he said.

Boeing Co., which saw a gain in bookings last month that probably contributed to the increase nationally, is among companies trying to make it easier for customers to get credit. Its financing arm may tap debt markets for as much as $800 million this year to help clients fund purchases, Chief Financial Officer James Bell said last week.

Cancellations at Boeing, the second-largest commercial- plane maker and defense contractor, have paralleled new orders this year. The Chicago-based company is cutting 10,000 jobs and reducing or postponing production of some models next year.

Auto Slump

Automakers continue to struggle. Chrysler LLC this month idled its 22 U.S. plants after filing for bankruptcy. General Motors Corp. also has cut output as a bankruptcy deadline looms.

Sales of existing houses, which account for more than 90 percent of the market, rose 2 percent in April to a 4.66 million annual rate from a 4.57 million pace the prior month, according to the survey median. The National Association of Realtors’ report is due May 27.

A day later, Commerce Department figures may show new-home sales increased 1.1 percent to a 360,000 annual rate, the most this year, the survey showed.

Toll Brothers Inc., the largest U.S. builder of luxury homes, said last week signs were beginning to emerge that the worst was over. The Horsham, Pennsylvania-based company said fiscal second-quarter revenue fell 51 percent from the same period last year as banks cut lending and demand sagged.

More Deposits

Deposits from buyers per community rose in seven of the past nine weeks compared with last year, Chief Executive Officer Robert Toll on a May 20 conference call with analysts. The increase made him “slightly more optimistic,” Toll said.

“We believe the U.S. government’s forceful intervention in the capital markets has begun to restore some confidence that the financial system is on the road to stabilization,” Toll said.

A report tomorrow may show the decline in home prices that began almost three years ago is moderating. Property values in 20 of the largest metropolitan areas probably dropped 18.4 percent in March from the same month last year compared with an 18.6 percent decline in February, economist project figures from S&P/Case-Shiller will show.

The rebound in stocks and easing of the housing slump are helping to make Americans less pessimistic. The Conference Board’s gauge of consumer confidence, also due tomorrow, may rise to 43 for May, a six-month high, from 39.2 last month.

Finally, revised data from the Commerce Department on May 29 may show the U.S. economy contracted in the first quarter less than initially estimated, reflecting a smaller decline in inventories and a narrower trade gap.