Durable goods, new homes better than expected

WASHINGTON (AP) — Demand for big-ticket manufactured goods and new-home sales both were better than expected in March, raising hopes that the long slides in manufacturing and housing are slowly coming to an end.

The Commerce Department said Friday that orders for durable goods dropped 0.8 percent last month, about half the 1.5 percent decline that economists expected. A rise in orders for commercial and military aircraft helped cushion weakness elsewhere.

The small drop followed a 2.1 percent increase in orders in February. That was the first gain after six straight monthly declines.

New-home sales fell 0.6 percent last month to a seasonally adjusted annual rate of 356,000 from an upwardly revised February rate of 358,000, the department said. Economists surveyed by Thomson Reuters expected a sales pace of 340,000 units. The inventory of new homes for sale dropped 5 percent from February levels.

February’s results were 6 percent higher than originally reported, but home sales last month were down nearly 31 percent from March 2008.

The housing results fanned optimism that developers have slashed prices and construction enough that sales have finally hit bottom. Prices, however, are likely to remain weak for months as builders continue to clear out their stock of unsold homes.

While February’s durable goods results were revised down from an earlier estimate of a 3.5 percent gain, that rise in orders followed by only a small drop in March show some faint signs of life in manufacturing.

Still, economists cautioned the best that can be expected is for industrial production to stabilize. They do not expect a rebound from the current low levels anytime soon given all the problems facing the economy.

“The bottom line here is that it is still impossible to tell whether the sharp slowing in the rate of decline of core orders in February-March is simply a correction after the horrors of the previous few, post-Lehman months, or the start of a genuine stabilization,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients.

U.S. manufacturers have been hurt by a steep drop in demand at home and from major overseas markets, which face their own recessions.

Diversified manufacturers 3M Co. and Honeywell International Inc. on Friday reported large drops in their quarterly profits and lowered their earnings outlooks for the year. 3M said weak demand from U.S. customers hurt sales of LCD screen coatings, office supplies, steel coatings and other products, while Honeywell said the broader downturn in commercial aviation and autos weighed heavily on its sales.