Durable Goods Orders in U.S. Probably Slowed as Demand Weakened

Orders for U.S. durable goods probably cooled in June, a sign some companies are holding back on capital spending as the global outlook dims, economists said before a report today.

The projected 0.3 percent gain in bookings for goods meant to last at least three years would follow a 1.3 percent increase in May, according to the median forecast of 78 economists surveyed by Bloomberg News. Separate figures may show claims for jobless benefits remained elevated and contracts to purchase previously owned homes rose at a slower pace.

Corporate spending is contributing less to the expansion as cooler demand from U.S. consumers and weaker overseas sales crimp profits at companies such as Xerox Corp. (XRX) Federal Reserve Chairman Ben S. Bernanke told Congress last week manufacturing has slowed and that policy makers stand ready to employ more stimulus if needed to help spur the world’s largest economy.

“Manufacturing is taking a bit of a hit,” said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Florida. “Firms are going to stay cautious about investment. There’s just a lot of uncertainty. Europe is a big concern.”

The Commerce Department data are due at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from a drop of 1.4 percent to an increase of 2.1 percent. Bookings excluding the volatile transportation category may have climbed 0.1 percent after a 0.7 percent gain in May, economists predicted.

Also at 8:30 a.m., a Labor Department report is projected to show applications for jobless benefits fell 6,000 last week to 380,000, according to the Bloomberg survey median. The figures reflect volatility induced by the annual auto-plant retooling period, making it difficult to determine whether the job market is improving or deteriorating.

Regional Reports

Regional reports indicate a mixed picture for factories in July. Manufacturing in the Philadelphia region shrank for the third consecutive month, while New York-area factories grew at a faster pace than anticipated.

At the national level, the Markit Economics preliminary index of U.S. manufacturing decreased to 51.8 in July from 52.5 a month earlier, the London-based group said this week.

Xerox, the Norwalk, Connecticut-based provider of printers and business services, cut its full-year profit forecast as the economic slump in Europe crimped demand for technology.

“The economic uncertainty has created more pressure especially in Europe and especially in our technology business,” Ursula Burns, chief executive officer, said on a July 20 conference call with analysts.

The Standard & Poor’s Supercomposite Machinery Index, which includes companies like Deere & Co., has fallen 2 percent this year, while the broader S&P 500 gauge has gained 6.4 percent.

Auto Sales

The auto industry remains one of the economy’s few bright spots. Vehicle purchases accelerated in June from the prior month, with General Motors Co. (GM), Ford Motor Co. and Chrysler Group LLC reporting sales that exceeded analysts’ estimates.

Also, a pickup in home construction has helped some manufacturers. Caterpillar Inc., the largest maker of construction and mining equipment, yesterday raised its full- year profit forecast on increased demand from North American builders.

Bernanke told lawmakers last week the risks from Europe’s debt crisis and impending changes in U.S. fiscal policy are challenges for the economy, and manufacturing has “slowed in recent months.”

“Economic activity appears to have decelerated somewhat during the first half of this year,” he said in testimony to Congress. The Fed is “prepared to take further action as appropriate to promote a stronger economic recovery.”

Figures due at 10 a.m. today from the National Association of Realtors may signal that housing, while stabilizing, will take time to strengthen. The group’s index of pending home sales rose 0.3 percent in June following a 5.9 percent jump the prior month, according to the Bloomberg survey median.

                        Bloomberg Survey

================================================================
                          Durables Durables  Initial
                            Orders Ex-Trans   Claims
                              MOM%     MOM%   ,000’s
================================================================

Date of Release              07/26    07/26    07/26
Observation Period            June     June   21-Jul
----------------------------------------------------------------
Median                        0.3%     0.1%      380
Average                       0.3%     0.1%      380
High Forecast                 2.1%     1.7%      405
Low Forecast                 -1.4%    -0.8%      365
Number of Participants          78       48       51
Previous                      1.3%     0.7%      386
----------------------------------------------------------------
4CAST                         0.0%    -0.4%      380
ABN Amro                      0.5%     ---       380
Action Economics              1.0%     0.5%      396
Ameriprise Financial         -0.4%    -0.6%      384
Banca Aletti                  0.0%     ---       370
Bank of Tokyo-Mitsubishi      0.5%     ---       375
Bantleon Bank AG              0.7%    -0.2%     ---
Barclays                      0.6%     0.3%      380
Bayerische Landesbank         0.3%    -0.3%     ---
BBVA                          0.2%    -0.3%      380
BMO Capital Markets           0.6%     0.0%      380
BNP Paribas                   0.4%     0.7%      400
BofA Merrill Lynch            0.2%     ---      ---
Briefing.com                  1.0%     0.5%      365
Capital Economics             0.1%     1.0%     ---
CIBC World Markets           -0.5%     0.4%     ---
Citi                          0.9%     0.5%      375
ClearView Economics          -0.5%     ---      ---
Comerica                      1.1%     0.4%     ---
Commerzbank AG                0.5%     1.3%      380
Credit Agricole CIB           0.3%     ---      ---
Credit Suisse                -1.0%    -0.5%      380
Daiwa Securities America      1.0%     ---      ---
Desjardins Group              0.1%     ---       382
Deutsche Bank Securities      0.5%     0.0%      380
Deutsche Postbank AG         -0.5%    -0.8%     ---
DZ Bank                       0.2%    -0.3%     ---
First Trust Advisors         -0.9%    -0.7%      376
FTN Financial                 0.6%    -0.2%     ---
Goldman, Sachs & Co.         -1.0%     ---      ---
Helaba                        0.8%     ---       380
High Frequency Economics     -0.7%    -0.2%      390
HSBC Markets                 -0.1%     0.1%      384
Hugh Johnson Advisors         1.0%     ---       380
IDEAglobal                    0.8%     0.2%      380
IHS Global Insight            0.3%     ---       385
Informa Global Markets        0.2%     ---       385
ING Financial Markets         0.2%     0.0%      375
Insight Economics             1.0%     ---       375
Intesa Sanpaulo               0.2%    -0.5%     ---
J.P. Morgan Chase             0.8%     0.1%      385
Janney Montgomery Scott       2.1%    -0.4%     ---
Jefferies & Co.               0.9%     ---       370
John Hancock Financial        0.9%     ---       375
Landesbank Berlin            -0.6%    -0.8%      375
Landesbank BW                -0.5%     ---      ---
Lloyds Bank                   0.8%     0.2%      385
Maria Fiorini Ramirez         ---      ---       375
Market Securities             0.2%     ---      ---
MET Capital Advisors          0.4%     ---      ---
Mizuho Securities            -0.5%     0.0%      380
Moody’s Analytics            -0.2%    -0.8%      373
Morgan Stanley & Co.         -0.5%     ---      ---
National Bank Financial      -0.5%    -0.2%     ---
Natixis                       1.0%     0.5%     ---
Nomura Securities             0.5%     0.2%     ---
Nord/LB                       0.2%     0.1%      380
OSK Group/DMG                 0.5%     ---      ---
Pierpont Securities          -1.3%     ---       382
PineBridge Investments       -0.1%     0.4%      375
PNC Bank                     -0.4%     ---      ---
Raiffeisenbank International  0.3%     0.0%     ---
Raymond James                 1.0%     0.4%      370
RBC Capital Markets           1.6%    -0.4%      405
RBS Securities                0.0%     ---       385
Renaissance Macro Research    0.0%    -0.5%      385
Scotiabank                    0.0%    -0.3%      385
SMBC Nikko Securities        -0.4%     0.1%     ---
Societe Generale             -1.4%     1.7%      385
Southern Polytechnic State    1.2%     ---       367
Standard Chartered            0.3%     0.1%      375
Stone & McCarthy Research     0.5%     ---       380
TD Securities                 0.7%     0.5%      375
UBS                           0.6%     1.0%      380
UniCredit Research            0.5%     ---      ---
University of Maryland        0.5%     ---       380
Wells Fargo & Co.             1.0%     0.2%     ---
Westpac Banking Co.           0.5%     ---       390
Wrightson ICAP                0.7%     ---       375
================================================================

To contact the reporter on this story: Shobhana Chandra in Washington schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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