By Shobhana Chandra and Bob Willis
March 24 (Bloomberg) -- Orders for durable goods rose in February for a third month and new-home sales fell to the lowest on record, indicating manufacturing will stay at the forefront of the economic recovery.
The 0.5 percent increase in bookings for long-lasting goods followed a 3.9 percent surge the prior month, the Commerce Department said today in Washington. Excluding transportation equipment, orders advanced more than anticipated. Sales of new homes fell 2.2 percent to an annual pace of 308,000 in February, the Commerce Department reported.
Companies from Boeing Co. to Owens-Illinois Inc. are benefiting from business spending on new equipment, inventory restocking and a revival of global demand. Job creation is needed for a broadening of the expansion that would include sustained gains in consumer spending and a mending of the real- estate market.
“Manufacturing is in the lead in pulling the economy along,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “If we get some job gains, which we think we will soon, there will be a pickup in home sales. We can’t bake a sustainable recovery until we get job growth”.
Stocks declined on concern government deficits will hamper a global recovery after Fitch Ratings cut Portugal’s credit rating. The Standard & Poor’s 500 Index fell 0.4 percent to 1,169 at 11:55 a.m. in New York. The 10-year Treasury note dropped, pushing up the yield to 3.77 percent from 3.69 percent late yesterday.
Blizzards, Foreclosures
Blizzards, unemployment and foreclosures combined to produce the fewest sales of houses last month since record- keeping began in 1963. Treasury Secretary Timothy F. Geithner yesterday said it would take a “long time” to repair the housing market.
The supply of homes at the current sales rate increased to 9.2 months’ worth, the highest since May, from 8.9 months. The median price of a new home in the U.S. increased 5.2 percent to $220,500 in February from a year earlier. The advance was the largest since September 2007.
Housing, the industry that triggered the worst recession in seven decades as the subprime mortgage market collapsed, showed signs of recovering in 2009 as an $8,000 first-time buyer tax credit boosted sales ahead of its originally scheduled expiration in November.
Economy’s Bright Spot
While housing has faltered in the last three months, manufacturing remains a bright spot for the recovery, and factories added workers to payrolls in January and February.
Orders for durable goods excluding transportation equipment increased 0.9 percent after a 0.6 percent decline in January. Economists anticipated a 0.6 percent rise, according to the median of 45 economists in a Bloomberg survey. Overall bookings were forecast to rise 0.6 percent.
Last month’s gain was paced by a surge in aircraft orders and increasing demand for machinery and metals.
Boeing, the world’s second-biggest commercial-plane maker, said it received 47 orders in February, up from 10 a month earlier. Chicago-based Boeing last week said it will boost production in coming years to meet stronger demand as airlines rebound from the recession-induced travel slump.
Business Equipment
Bookings for non-defense capital goods excluding aircraft, a proxy for future business investment, increased 1.1 percent after dropping 3.9 percent the prior month. Shipments of those items, used in calculating gross domestic product, climbed 0.8 percent after a 1.9 percent decrease.
Factories boosted durable-goods inventories by 0.3 percent, the biggest gain since December 2008. In a sign demand is starting to outstrip available resources, unfilled orders advanced 0.4 percent, the most since July 2008.
Growing sales in the U.S. and abroad, and the need to replenish inventories are also helping companies such as Owens- Illinois, the largest U.S. maker of glass containers for food and beverages.
“We are starting to see the beginnings of a recovery, which we anticipate will extend through 2010 and 2011,” Chief Executive Officer Al Stroucken said in a presentation to investors on March 18. Stroucken said he expects “volumes to recover due to destocking having run its course”.
--With assistance from Will Daley in New York. Editors: Carlos Torres, Vince Golle
Business Week
