June 24 (Bloomberg) -- Orders for U.S. durable goods unexpectedly jumped in May, a sign companies are gaining confidence the recession is easing.

The 1.8 percent rise in bookings for items meant to last several years matched the previous month’s increase, the Commerce Department said today in Washington. Another report showed sales of new houses unexpectedly dropped last month, indicating foreclosures made existing homes more attractive.

The durable-goods figures reinforce a trend of improvement that spurred the Organization for Economic Cooperation and Development to lift its growth forecast for the world’s most developed nations for the first time in two years. The Federal Reserve today signaled the worst of the slump is over.

“The freefall environment of the first quarter and late last year is definitely over, but we have yet to see convincing signs of a vigorous recovery,” said Zach Pandl, an economist at Nomura Securities International Inc. in New York. “Firms are picking up orders after basically shelving all of their investment plans over the last few months.”

Treasuries declined after the Fed disappointed investors by not increasing its $1.75 trillion bond-purchase program, and stocks pared gains. Benchmark 10-year note yields rose to 3.69 percent at 4:24 p.m. in New York from 3.62 percent late yesterday. The Standard & Poor’s 500 Stock Index closed up 5.84 points, or 0.7 percent, at 900.94.

Contraction ‘Slowing’

“The pace of economic contraction is slowing,” the Fed said in a statement after its meeting. Officials said inflation will remain “subdued for some time,” and rates will stay at “exceptionally low levels” for an “extended period.” Policy makers kept the benchmark interest rate between zero and 0.25 percent.

Economists projected goods orders would drop 0.9 percent, according to the median of 75 forecasts in a Bloomberg News survey. Estimates ranged from a decline of 3.9 percent to a gain of 1 percent. Commerce revised the April gain to 1.8 percent from a previously reported 1.9 percent increase.

Demand for non-defense capital goods excluding aircraft, a proxy for future business investment, jumped 4.8 percent, the most since September 2004. Shipments of those items, used in calculating gross domestic product, rose 0.3 percent after dropping 2.7 percent.

Orders for computers and related products jumped 9.4 percent. Machinery demand gained 7.7 percent, the most in more than a year.

Output May rise

“By the third quarter, production will start to increase again as the inventory declines ease,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “The government stimulus has helped income, stabilizing consumer spending, and that’s showing through in better orders. It does appear that the recession is coming to an end.”

Nucor Corp., the second-largest U.S. steelmaker, may boost plant operating rates to as much as 60 percent of capacity in the third quarter as customers use up inventories, Chief Executive Officer Dan DiMicco said.

“We have seen distributors begin to order at a level consistent with real demand,” DiMicco said today in a Bloomberg Television interview.

New-Home Sales

Sales of new houses decreased 0.6 percent to an annual pace of 342,000 after a revised 344,000 rate in April that was lower than previously estimated, the Commerce Department also reported today. The median sales price fell 3.4 percent from May 2008, compared with a 17 percent drop for existing homes reported yesterday by the National Association of Realtors.

Without bigger price cuts, builders may keep losing market share as the jobless rate and foreclosures climb. The recent jump in mortgage rates may hurt demand even more, threatening to undermine the stabilization in construction that’s emerged so far this year.

“Homebuyers are seeing better opportunities, more attractive opportunities, in the existing market than they are in the new-home market,” said Michael Moran, chief economist at Daiwa Securities America Inc. in New York, who projected sales would drop. “Builders are less inclined to offer discounts and throw in amenities now that inventories are better under control.”

Price Decreases

The median price of a new home fell to $221,600 from $229,300 in May 2008. The 12-month decrease was the smallest so far this year. The cost was up 4.2 percent from a month earlier.

Sales of new homes were down 33 percent from May 2008. They reached a record-low 329,000 in January, down 76 from the July 2005 peak.

The report contrasts with figures yesterday from the real- estate agents group that showed purchases of existing homes rose 2.4 percent to an annual rate of 4.77 million last month. It marked the first back-to-back increase since 2005.

Sales of new houses made up 6.7 percent of the market in May, down from 12.5 percent two years ago.

Recent increases in home construction raised hopes the market was starting to stabilize. Housing starts increased 17 percent in May, the Commerce Department said last week.

Even so, some builders are cautious about the outlook. New home sales in the U.S. likely will remain little changed in coming months, Pulte Homes Inc. Chief Executive Officer Richard Dugas said at an investor conference yesterday.

“We are certainly focused on stability before we get to any type of recovery,” Dugas said at a Wachovia Corp. conference in Boston. “There could be some signs of stabilization,” he said. Still, “I’m not here today before you to call a bottom to the industry.”

To contact the reporters on this story: Shobhana Chandra in Washington at schandra1@bloomberg.netCourtney Schlisserman in Washington cschlisserma@bloomberg.net

Last Updated: June 24, 2009 16:39 EDT