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Durables Orders Probably Rose in Sign of Sustained U.S. Demand

Durables Orders Probably Rose in Sign of Sustained U.S. Demand
Customers shop for hardware at a Cole Hardware store in San Francisco, California. Photographer: David Paul Morris/Bloomberg

March 26 (Bloomberg) -- Orders for U.S. durable goods probably rose in February by the most in five months, helped by a rebound in demand for commercial aircraft, economists said before a report today.

The 3.9 percent increase in bookings for goods meant to last at least three years would follow a 4.9 percent drop in January, according to the median forecast of 80 economists surveyed by Bloomberg. Other reports may show the residential real-estate market continues to improve.

Gains in auto and home purchases may keep benefiting manufacturers from 3M Co. to United Technologies Corp., leading to increases in output that are giving the economy a lift. Additionally, business investment in new equipment is picking up as companies look past the budget negotiations in Washington and focus on expanding capacity as demand improves.

“We’re pretty optimistic that durables orders will continue to move up,” said Tom Simons, an economist at Jefferies LLC in New York. “There’s still a lot of pent-up demand. Businesses are executing on plans that they’d put off last year when there was so much uncertainty.”

The Commerce Department will release the durable goods figures at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from a 0.1 percent drop to a gain of 6.5 percent.

Data due at 9 a.m. may show the S&P/Case-Shiller index of property values in 20 cities rose 7.9 percent in the 12 months ended January, the biggest year-over-year gain since June 2006, according to the Bloomberg survey median.

Home Sales

At 10 a.m., the Commerce Department may report new homes sold at a 420,000 annual pace last month after a 437,000 rate in January, the best back-to-back performance in four years, economists surveyed by Bloomberg predicted.

Americans’ moods may have darkened a bit in March after improving the prior month by the most in a year, other data may show at 10 a.m. The Conference Board’s consumer confidence index eased to 67.5 this month from 69.6 in February, according to the median forecast in the Bloomberg survey.

Even so, progress in the job market and an increase in household wealth linked to rising home values and stocks signal consumers will sustain spending, which accounts for about 70 percent of the economy.

Investors are encouraged by the outlook. The Standard & Poor’s 500 Index has increased 8.8 percent this year.

Boeing Orders

Aircraft bookings probably provided a boost to durables goods last month. Boeing Co., the Chicago-based aerospace company, said it received orders for 179 aircraft in February, up from two in January.

Demand for autos may also contribute to the gains. Cars and light trucks sold at a 15.3 million annual rate in February after a 15.2 million pace the prior month, Ward’s Automotive Group data showed.

The Commerce Department’s report may also show that orders excluding demand for transportation gear, which is often volatile, rose 0.6 percent, the sixth consecutive monthly increase, economists predicted. It would be the longest stretch of advances since an eight-month string through March 2006.

3M, the St. Paul, Minnesota-based maker of products ranging from Scotch tape to dental braces, is among companies saying growth in the U.S. will help cushion weakness in markets like Europe, especially in consumer electronics.

Global Outlook

“We’re operating pretty steady in the U.S. and Latin America,” David Meline, chief financial officer, said at a March 21 conference. “In Asia, it’s more mixed. Western Europe continues to have a number of challenges.”

One drawback to future gains may be the automatic across-the-board government spending cuts that began taking place on March 1 as part of the 2011 deal to increase the U.S. debt limit.

Federal Reserve Bank of New York President William C. Dudley said yesterday that the “greatest danger” to growth is tighter fiscal policy.

While cuts in U.S. military spending may trim its profits, United Technologies, the maker of Pratt & Whitney jet engines and Otis elevators, said it expects the expansion will remain intact.

“The U.S. economy is better and it is going to continue to get better,” Gregory Hayes, chief financial officer at Hartford, Connecticut-based United Technologies, said at a March 14 analyst meeting. “We’ve got another year-and-a-half or so probably of low interest-rate environment, which we could hope to capitalize on.”

                       Bloomberg Survey

================================================================
                          Durables Durables Case Shil Consumer
                            Orders Ex-Trans  Monthly     Conf
                              MOM%     MOM%     YOY%    Index
================================================================
Date of Release              03/26    03/26    03/26    03/26
Observation Period            Feb.     Feb.     Jan.    March
----------------------------------------------------------------
Median                        3.9%     0.6%     7.9%     67.5
Average                       3.8%     0.3%     7.8%     67.4
High Forecast                 6.5%     4.0%     8.9%     72.0
Low Forecast                 -0.1%    -2.2%     6.0%     60.0
Number of Participants          80       53       30       79
Previous                     -4.9%     2.3%     6.8%     69.6
----------------------------------------------------------------
4CAST Ltd.                    3.2%     0.8%     8.2%     65.0
ABN Amro Inc.                 4.0%     ---      ---      69.0
Action Economics              2.5%    -1.9%     ---      66.0
Ameriprise Financial Inc      3.2%     0.5%     ---      68.5
Banca Aletti & C spa          4.0%     ---      ---      72.0
Bank of the West              3.0%    -0.5%     ---      67.0
Bank of Tokyo- Mitsubishi     4.0%     ---      ---      72.0
Banorte-IXE                   ---      ---      ---      67.5
Bantleon Bank AG              4.2%    -0.2%     ---      68.0
Barclays                      2.6%    -0.1%     7.8%     66.0
Bayerische Landesbank         4.0%     0.5%     ---      67.3
BBVA                          3.2%     0.7%     ---      68.4
BMO Capital Markets           5.7%     1.6%     7.6%     68.6
BNP Paribas                   5.3%     0.9%     ---      65.0
BofA Merrill Lynch Resear     4.0%     1.0%     7.9%     66.0
Briefing.com                  5.0%    -0.5%     7.5%     65.0
Capital Economics             6.5%    -1.0%     8.6%     65.0
CIBC World Markets            3.9%    -1.0%     ---      66.0
Citi                          6.0%    -2.1%     ---      69.0
ClearView Economics           2.5%     ---      ---      71.0
Comerica Inc                  2.6%     ---      ---      70.0
Commerzbank AG                6.0%     1.0%     7.8%     68.0
Credit Agricole CIB           6.0%     4.0%     ---      65.0
Credit Suisse                 2.5%    -1.0%     ---      72.0
Daiwa Securities America      2.5%     ---      ---      67.0
Danske Bank A/S               4.9%     ---      ---      66.6
DekaBank                      3.0%     ---      ---      70.0
Desjardins Group              6.2%     ---      7.4%     66.6
Deutsche Bank Securities      3.0%     1.0%     7.8%     68.0
Deutsche Postbank AG          4.0%     0.5%     ---      ---
Fact & Opinion Economics      4.3%     ---      7.7%     69.0
First Trust Advisors          4.5%     0.7%     ---      64.7
FTN Financial                 3.2%     0.3%     8.1%     64.0
Goldman, Sachs & Co.          5.9%     ---      ---      67.0
Hammer Partners SA            ---      ---      ---      63.6
Helaba                        4.5%     ---      ---      68.0
High Frequency Economics      5.5%    -2.0%     ---      66.5
HSBC Markets                  4.6%     0.7%     8.3%     67.5
Hugh Johnson Advisors         1.4%     ---      ---      63.9
IDEAglobal                    2.5%     1.0%     7.2%     70.0
IHS Global Insight            5.7%     ---      7.9%     65.0
Informa Global Markets        3.2%     ---      ---      69.2
ING Financial Markets         3.9%     0.8%     7.8%     71.0
Intesa Sanpaolo               3.8%     0.6%     ---      67.0
J.P. Morgan Chase             1.2%    -2.2%     8.2%     68.0
Janney Montgomery Scott L     2.2%     0.5%     8.9%     67.2
Jefferies LLC                 3.9%     ---      ---      68.0
Landesbank Berlin             6.5%     0.0%     ---      64.0
Landesbank BW                 ---      ---      ---      65.0
Lloyds Tsb Bank Plc           3.2%     1.0%     ---      71.0
Market Securities             4.3%     ---      8.1%     ---
MET Capital Advisors          1.0%     ---      ---      67.0
Mizuho Securities             1.5%     0.9%     6.0%     65.0
Modal Asset                   ---      1.4%     ---      ---
Moody’s Analytics             4.3%     1.1%     ---      69.5
Morgan Stanley & Co.          4.0%     ---      ---      66.0
National Bank Financial       3.8%     0.9%     ---      69.0
Natixis                       4.0%     1.0%     8.0%     68.5
Nomura Securities Intl.       4.6%     1.3%     8.4%     70.0
OSK Group/DMG                 3.8%     ---      ---      ---
Oxford Economics Ltd          0.6%     0.6%     7.9%     ---
Pantheon Macroeconomic        3.0%    -1.0%     7.7%     63.0
Pierpont Securities LLC       4.7%     ---      ---      66.0
PineBridge Investments        3.2%     1.1%     ---      68.0
PNC Bank                      0.3%     ---      ---      66.5
Prestige Economics            5.2%    -0.3%     ---      67.5
Raiffeisenbank Internatio     5.5%    -0.5%     ---      62.0
Raymond James                 3.8%    -0.2%     7.4%     68.5
RBC Capital Markets           3.5%    -1.0%     ---      69.0
RBS Securities Inc.           3.0%     ---      ---      66.0
Regions Financial Corp        4.1%     1.1%     ---      69.1
Scotiabank                    3.0%     0.5%     ---      70.0
SMBC Nikko Securities         5.9%     1.5%     7.5%     60.0
Societe Generale              6.0%     1.2%     8.3%     63.5
Southbay Research             1.6%    -0.6%     ---      ---
Southern Polytechnic Stat    -0.1%     ---      ---      ---
Standard Chartered Bank       3.6%     1.0%     7.7%     66.0
Stone & McCarthy Research     3.7%     ---      ---      72.0
TD Securities                 4.0%     1.0%     7.7%     71.0
UBS                           3.5%     0.3%     8.1%     66.5
UniCredit Research            ---      ---      ---      70.0
Union Investment              ---      ---      ---      69.5
University of Maryland        2.5%     ---      7.9%     68.0
Wells Fargo & Co.             3.7%    -0.2%     ---      66.9
Westpac Banking Co.           3.0%     ---      ---      65.0
Wrightson ICAP                4.0%     ---      ---      70.0
================================================================

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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