By Shobhana Chandra
June 24 (Bloomberg) -- Orders for U.S. durable goods probably fell in May for the second time in three months, a sign companies still lack confidence the recession will soon end, economists said before a report today.
Bookings for goods meant to last several years dropped 0.9 percent after rising 1.7 percent in April, according to the median estimate in a Bloomberg News survey. A drop in prices probably propelled new-homes sales last month to their first back-to-back gain since 2007, another report may show.
The slump in investment on new equipment, which was aggravated last month by auto shutdowns linked to restructuring at Chrysler LLC and General Motors Corp., is likely to persist until gains in consumer spending are sustained. Still, Federal Reserve officials meeting today may indicate that the worst of the economic slump is over as housing stabilizes.
“Business spending will weigh down the recovery,” said Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado. “Companies don’t want to commit. They will not be investing until they see where demand is going.”
The Commerce Department’s report on durable goods is due at 8:30 a.m. in Washington. Projections in the Bloomberg survey of 75 economists ranged from a decline of 3.9 percent to a 1 percent gain.
At 10 a.m., Commerce may report that new-home sales rose 2.3 percent to a 360,000 annual pace in May from a 352,000 rate the prior month, according to the survey median.
Home Sales
Home resales, which make up around 90 percent of the market, climbed last month to the highest level since October, the National Association of Realtors reported yesterday. Gains over the last two months were the first back-to-back since 2005.
The Standard & Poor’s homebuilder supercomposite index has retreated 24 percent since reaching a seven-month high on May 4 as concern mounted that rising mortgage rates will choke off any recovery before it develops.
The bankruptcies of Chrysler and General Motors are likely to depress factory orders in the near term. Chrysler this month said that it resumed production at a Detroit plant, after idling all its factories on May 1 while it reorganized. GM said it’ll extend downtime at units in Texas and Kentucky while adding a shift at a Michigan facility.
Boeing Co., the world’s second-largest commercial-jet builder, received 20 orders in May, up from 17 a month earlier. Chicago-based Boeing said it is sticking to its 2009 delivery projections even as cancellations have almost outweighed new orders this year and carriers have deferred dozens of planes.
Broad-based Drop
Excluding transportation equipment, durable goods bookings probably fell 0.5 percent in May, economists predicted.
The outlook for sales has yet to improve, according to officials at General Electric Co., whose businesses span power- plant turbines, jet engines and private-label credit cards.
“I am not particularly of the ‘green shoots’ group yet,” GE Vice Chairman John Rice said this month in Atlanta, referring to a phrase used by Fed Chairman Ben S. Bernanke that described signs of a nascent recovery. “I have not seen it in our order patterns yet.”
Fed officials, concluding a two-day meeting, are projected to hold the benchmark interest rate in the zero to 0.25 percent range, according to economists surveyed. Policy makers may try to reassure investors that borrowing costs will stay low for the foreseeable future.
Manufacturers also face headwinds from overseas as economies contract worldwide. The World Bank this week said the global recession will be deeper than it predicted in March, with the world economy expected to shrink 2.9 percent this year. The bank also trimmed the growth forecast for 2010.
Bloomberg Survey
=======================================================
Durables Durables New Home
Orders Ex-Trans Sales
MOM% MOM% ,000’s
=======================================================
Date of Release 06/24 06/24 06/24
Observation Period May May May
-------------------------------------------------------
Median -0.9% -0.5% 360
Average -0.8% -0.4% 363
High Forecast 1.0% 1.0% 400
Low Forecast -3.9% -2.8% 345
Number of Participants 75 40 72
Previous 1.7% 0.4% 352
-------------------------------------------------------
4CAST Ltd. -1.0% -0.5% 375
Action Economics -1.5% -0.5% 365
AIG Investments 0.5% 0.3% 356
Aletti Gestielle SGR -1.5% --- 365
Ameriprise Financial Inc -1.2% -0.4% 362
Argus Research Corp. 0.5% --- 365
Banesto -1.2% --- 360
Bank of Tokyo- Mitsubishi -0.8% --- 370
Bantleon Bank AG -0.5% -0.3% 365
Barclays Capital 0.0% --- 360
BBVA -0.6% -0.4% 360
BMO Capital Markets -1.8% -0.8% 359
BNP Paribas -1.0% --- 365
Briefing.com -1.1% -0.6% 365
Calyon -1.0% -0.5% 358
Capital Economics -1.5% 0.0% 380
CIBC World Markets -1.2% -0.7% 360
Citi -1.8% 0.1% 360
ClearView Economics -1.0% --- 380
Commerzbank AG 0.5% 0.5% 355
Credit Suisse -0.2% 0.5% 370
Daiwa Securities America 1.0% --- 350
Danske Bank --- --- 350
DekaBank -1.2% --- 350
Desjardins Group -0.6% --- 358
Deutsche Bank Securities -1.0% -0.5% 360
Deutsche Postbank AG 0.3% 0.2% ---
DZ Bank -1.0% -0.6% 350
Exane -1.0% -0.8% 370
First Trust Advisors -1.0% -0.4% 362
Fortis -0.5% --- 355
Goldman, Sachs & Co. 0.0% --- 359
Helaba -0.2% --- 365
Herrmann Forecasting -1.2% --- 367
High Frequency Economics -0.2% -0.3% 400
HSBC Markets -0.3% 0.2% 380
IDEAglobal -0.9% -0.5% 365
IHS Global Insight 0.4% --- 367
Informa Global Markets -1.0% --- 360
ING Financial Markets -0.6% -0.3% 370
Insight Economics -1.0% --- 360
Intesa-SanPaulo -0.8% -0.5% 370
J.P. Morgan Chase -0.5% --- 365
Janney Montgomery Scott L -1.0% -1.1% 345
Johnson Illington Advisor 0.0% --- 360
Landesbank Berlin -0.2% 0.3% 360
Landesbank BW -0.5% --- 360
Merrill Lynch -0.4% -0.7% 350
MFC Global Investment Man -1.2% -0.8% 355
Mizuho Securities -1.1% --- 357
Moody’s Economy.com -0.5% 0.5% 375
Morgan Stanley & Co. 0.0% --- 360
National Bank Financial -0.7% -0.3% 355
Natixis -0.2% --- 360
Nomura Securities Intl. 0.5% 1.0% 360
Nord/LB -0.4% -0.7% ---
PNC Bank -2.0% --- 390
Raymond James 0.2% 0.6% 355
RBC Capital Markets -1.2% --- ---
RBS Securities Inc. -0.7% --- 360
Ried, Thunberg & Co. -1.5% --- 360
Schneider Foreign Exchang -1.7% -1.9% 350
Scotia Capital -0.6% -0.4% 370
Societe Generale -0.5% -0.5% 370
Stone & McCarthy Research -1.1% --- 350
TD Securities -1.0% -0.5% 361
Tullett Prebon -0.9% --- 360
UBS Securities LLC -1.7% -0.9% ---
Unicredit MIB 0.0% --- 350
University of Maryland -0.5% --- 365
Wachovia Corp. -3.9% -2.8% 354
Wells Fargo & Co. -1.5% -0.5% 365
WestLB AG -0.9% --- 360
Westpac Banking Co. -2.0% --- 366
Woodley Park Research -3.9% --- 373
Wrightson Associates -1.5% --- 360
=======================================================
To contact the report on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
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