Durable Goods Orders in U.S. Probably Rose in April After Slump
Orders for U.S. durable goods probably increased in April after falling by the most in seven months as companies invested in aircraft and capital equipment, economists forecast ahead of a report today.
The 1.5 percent gain in bookings for goods meant to last at least three years would follow March’s 6.9 percent decline, the biggest since August, according to the median forecast from 78 economists surveyed by Bloomberg. Orders excluding transportation equipment, which is a volatile component, may have risen 0.5 percent last month after dropping 2.9 percent in March.
Quickening activity in the housing and auto industries may ripple throughout manufacturing, rendering the economy better able to recover from a slowdown this quarter. At the same time, government cutbacks, higher taxes on consumers and cooling exports are crimping demand, which means any rebound will be slow to develop.
“Manufacturing won’t fall off the cliff in the next six months, but I see it crunching along slowly,” said Jeffrey Herzog, a senior economist at Oxford Economics Ltd. in New York. “The main near-term risk is that the effects from the higher taxes or government spending cuts are stronger than anticipated.”
Aircraft bookings probably underpinned April’s rebound. Boeing Co. (BA), the Chicago-based aerospace company, said it received 51 orders last month, up from 39 in March.
Orders for non-defense capital goods excluding aircraft, considered a proxy for future business investment, picked up by 0.5 percent last month following a 0.6 percent drop in March, according to the median forecast of economists surveyed.
A pickup in manufacturing would stem a recent slowdown in inventory building that curbed activity. The Institute for Supply Management’s manufacturing index declined in March and April, falling to just above the 50 level that represents the dividing line between contraction and expansion.
The U.S. economy probably cooled in the second quarter, giving businesses a reason to reduce the amount of stockpiles they hold, according to economists surveyed by Bloomberg. The federal government has also slashed outlays under sequestration, and American earners are facing increased payroll taxes.
The weaker pace of growth is hurting manufacturers’ shares. The Standard & Poor’s Supercomposite Machinery Index has advanced 9.7 percent this year, compared with a 15.7 percent gain in the broader S&P 500.
In the second half of 2013, a faster expansion will probably give companies reason to spend more, supporting producers. Home construction is picking up, and automakers are boosting output.
“We see indicators which point towards strengthening economies,” Louis Chenevert, chief executive officer of United Technologies Corp. (UTX), said during an industry conference on May 21. Orders in the first quarter signal a rebound in the second half of the year, he said.
Chenevert said housing starts in the U.S. could increase 25 percent in 2013, European demand has shown signs of picking up and emerging markets have “good momentum.” Hartford, Connecticut-based United Technologies makes Carrier air conditioners, Pratt & Whitney jet engines and Otis elevators.
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