Orders for U.S. Durable Goods Rose More Than Forecast

Orders for U.S. durable goods rose more than forecast in May, reflecting broad-based gains that signal manufacturing is stabilizing.

Bookings for goods meant to last at least three years climbed 3.6 percent for a second month, the Commerce Department reported today in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 3 percent increase. Excluding transportation gear, where demand is volatile month to month, orders advanced 0.7 percent, also topping projections.

Growing demand for cars and trucks and gains in homebuilding are helping counter weakness in export markets, benefiting manufacturers such as BorgWarner Inc. and United Technologies Corp. Businesses may also decide to replace aging equipment, which will help bolster expansion in the second half of 2013.

“This is the missing piece for an upswing in economic activity,” said Millan Mulraine, director of U.S. rates research at TD Securities USA LLC in New York. “Business capital investment activity is off to a strong showing. If businesses start investing, they’ll add to their workforce.”

Other reports today showed prices of existing homes and sales of new dwellings both increased more than forecast.

Median Prices

Purchases of new houses in May rose 2.1 percent to an annualized pace of 476,000, exceeding all estimates in a Bloomberg survey and the most since July 2008, the Commerce Department said. The median selling price climbed 10.3 percent from May 2012.

The S&P/Case-Shiller index of property values increased 12.1 percent in April from a year earlier, the biggest year-over-year gain since March 2006, after advancing 10.9 percent a month earlier. The median forecast in a Bloomberg survey of 28 economists called for a 10.6 percent advance.

Stocks advanced on the reports and after the People’s Bank of China said it will keep money-market rates at “reasonable” levels. The Standard & Poor’s 500 Index climbed 0.5 percent to 1,581.14 at 10:02 a.m. in New York.

Estimates for durable goods in the Bloomberg survey ranged from a drop of 2.4 percent to a 9.2 percent gain.

Today’s figures showed bookings for commercial aircraft jumped 51 percent after climbing 18.3 percent in April. Chicago-based Boeing Co. received 232 aircraft orders in May, up from 51 in April.

Auto Orders

Orders for automobiles and parts declined 1.2 percent after a 2.4 percent advance in April. Cars and light trucks sold at a 15.2 million annualized rate in May, a 2.4 percent increase from the prior month, according to industry figures.

Excluding transportation equipment, bookings climbed for second month following a 1.7 percent increase in April that was larger than previously reported. The median forecast in the Bloomberg survey projected no change last month.

Orders for non-defense capital goods excluding aircraft, a proxy for future business investment in computers, electronics and other equipment, climbed 1.1 percent in May after rising 1.2 percent the prior month.

Shipments of those products, a measure used in calculating gross domestic product, rose 1.7 percent, the biggest gain since November, after falling 2 percent in April.

Growth Outlook

The U.S. economy, the world’s largest, will grow at a 1.7 percent annualized rate this quarter after expanding at a 2.4 percent pace in the previous three months, according to the median forecast of economists surveyed by Bloomberg this month.

Federal Reserve Chairman Ben S. Bernanke said last week that the central bank may begin to pare its $85 billion in monthly asset purchases this year if the economy performs as forecast by the Fed. The process could be completed by mid 2014, by which time the jobless rate will probably have dropped to around 7 percent, he said.

The effects of government spending cuts that began March 1 may be holding back growth. At Steelcase Inc., a manufacturer of office furniture, sales for the three months that ended May 24 dipped. While the decline was driven mostly by weakness in northern Europe, the Grand Rapids, Michigan-based company also reported fewer U.S. federal government orders.

“We experienced a modest decline within the U.S. federal government sector, which marks the eighth consecutive quarter of year-over-year declines,” Chief Financial Officer Dave Sylvester said on a June 20 earnings call.

Today’s report also showed total sales of durable good climbed 1.2 percent in May, the biggest gain in six months. That helped curbed inventories, which grew 0.1 percent last month after expanding 0.3 percent in April.

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