Durable Goods Orders in U.S. Probably Fell on Auto Shutdowns

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.