By Timothy R. Homan
Aug. 27 (Bloomberg) -- Orders for U.S. durable goods probably stalled in July as elevated raw-material costs and slowing sales prompted companies to limit spending, economists said ahead of a government report today.
Bookings for goods meant to last several years were unchanged after a gain of 0.8 percent in June, according to the median estimate in a Bloomberg News survey of 76 forecasters. Excluding transportation equipment, orders probably fell by the most in five months.
The three-year housing slump and stricter lending rules may hurt demand even more in coming months after the effects of the federal tax rebates fade, raising the risk growth will slow. Economies abroad are also weakening, indicating companies will not be able to count on sustained gains in exports.
``With domestic demand expected to slow sharply over the second half of the year, orders and investment spending will be weak,'' said Peter Kretzmer, a senior economist at Bank of America Corp. in New York.
The Commerce Department is scheduled to release its durable goods report at 8:30 a.m. in Washington. Projections in the Bloomberg survey ranged from a drop of 2.1 percent to an advance of 2.2 percent.
Excluding transportation equipment, orders probably fell 0.7 percent, according to the survey median.
Other reports have indicated manufacturing has stagnated.
The Institute for Supply Management said on Aug. 5 that its factory index fell to 50 in July, the dividing line between growth and contraction, from 50.2 a month earlier. During the 2001 recession the index averaged 43.5.
Export Boost
Manufacturing has fared better than in past downturns, helped in part by a weak dollar that has boosted exports. Now, that expansion is in question as overseas growth falters.
Europe's economy contracted in the second quarter for the first time since the introduction of the euro almost a decade ago, the European Union said this month. Japan's economy also shrank in the period as consumers spent less and exports fell, the government said on Aug. 13.
Manufacturing ``declined or remained weak in most districts,'' even as ``demand for exports remained generally high,'' the Federal Reserve said last month in its regional economic survey known as the Beige Book. Bank lending ``was generally reported to be restrained.''
Consumers are retrenching as their home equity declines and banks restrict lending. Sales at U.S. retailers fell in July for the first time in five months as demand for automobiles slumped, the Commerce Department reported this month.
Slower Growth
Economists surveyed by Bloomberg News earlier this month forecast the U.S. economy will grow in the last six months of the year at half the pace of the first two quarters. Household spending, which has risen every quarter since 1992, is projected to stall in the last three months of 2008.
A slowdown in growth and spending may give companies even less incentive to invest or hire. Alcoa Inc., the world's third largest aluminum producer, said last week that it will lay off 300 employees in Texas starting Aug. 31. The cuts come as a result of ``uneconomical power prices,'' the New York-based company said in a statement.
Bloomberg Survey
=============================================
Durables Durables
Orders Ex-Trans
MOM% MOM%
=============================================
Date of Release 08/27 08/27
Observation Period July July
---------------------------------------------
Median 0.0% -0.7%
Average -0.1% -0.6%
High Forecast 2.2% 0.6%
Low Forecast -2.1% -2.9%
Number of Participants 76 43
Previous 0.8% 2.0%
---------------------------------------------
4CAST Ltd. -1.0% -1.5%
Action Economics 0.0% -2.9%
AIG Investments 0.2% 0.6%
Aletti Gestielle SGR 0.5% ---
Argus Research Corp. 0.5% ---
Banc of America Securitie -0.3% ---
Bank of Tokyo- Mitsubishi 0.5% ---
Barclays Capital 0.3% ---
BBVA 0.1% 0.5%
BMO Capital Markets 0.1% -0.7%
BNP Paribas -0.4% ---
Briefing.com 0.5% ---
Calyon 0.7% 0.4%
CFC Group -0.2% -1.0%
CIBC World Markets 0.0% -0.7%
Citi 2.2% -0.3%
ClearView Economics 0.5% ---
Commerzbank AG -0.3% ---
Credit Suisse 0.2% -0.3%
Daiwa Securities America -1.0% ---
DekaBank 0.1% ---
Desjardins Group 0.1% ---
Deutsche Bank Securities 0.3% 0.5%
Deutsche Postbank AG 0.0% -0.7%
Dresdner Kleinwort -0.2% -1.0%
DZ Bank 0.2% -0.4%
First Trust Advisors 0.4% -1.3%
Fortis 0.0% ---
FTN Financial 0.2% 0.4%
Global Insight Inc. 0.0% ---
Goldman, Sachs & Co. -1.0% ---
H&R Block Financial Advis -0.5% -1.0%
HBOS Treasury Services 0.0% -0.6%
Helaba -0.5% -1.0%
High Frequency Economics -1.0% -1.0%
Horizon Investments -0.2% -0.3%
HSBC Markets 0.1% -0.4%
IDEAglobal -0.5% 0.3%
Informa Global Markets 0.1% ---
ING Financial Markets 0.0% -1.0%
Insight Economics -1.0% ---
Intesa-SanPaulo -0.5% -0.8%
J.P. Morgan Chase 0.6% -0.8%
Janney Montgomery Scott L 0.4% -0.7%
Landesbank Berlin -2.1% -1.0%
Landesbank BW 0.0% ---
Lehman Brothers -1.0% ---
Lloyds TSB 0.3% ---
Merk Investments 0.0% -0.6%
Merrill Lynch 0.5% -0.9%
Moody's Economy.com -0.5% -0.2%
Morgan Keegan & Co. -0.3% ---
Morgan Stanley & Co. 0.2% ---
National Bank Financial -0.1% -0.6%
Natixis 0.4% -1.0%
Newedge 0.3% -0.2%
Nomura Securities Intl. -1.3% -1.1%
Nord/LB -0.5% 0.3%
PNC Bank -0.1% ---
RBS Greenwich Capital -0.7% ---
Ried, Thunberg & Co. -0.5% ---
Schneider Trading Associa -1.7% -1.6%
Scotia Capital -0.1% -0.5%
Societe Generale 0.0% -0.5%
Stone & McCarthy Research 0.6% ---
TD Securities -0.5% -1.3%
Thomson Financial/IFR -0.3% 0.5%
Tullett Prebon 0.2% ---
UBS Securities LLC -1.0% -2.3%
Unicredit MIB 0.2% ---
University of Maryland 0.1% ---
Wachovia Corp. 0.2% -0.4%
Wells Fargo & Co. 0.0% ---
WestLB AG 0.1% ---
Westpac Banking Co. 0.5% ---
Wrightson Associates -0.5% ---
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To contact the report on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net
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