Thursday, June 25, 2009
WASHINGTON (AP) — Orders to U.S. factories for manufactured goods from computers to aircraft surged in May for a second straight month. And a gauge of business investment rose last month by the most in nearly five years.
Together, the data Wednesday signal that the recession could be at or near a bottom.
Yet new-home sales fell unexpectedly last month. Economists said the two reports painted a picture of an economy no longer in free-fall, but still unable to mount a sustained recovery from the longest recession since World War II.
Policymakers at the Federal Reserve decided to leave a key interest rate unchanged at between zero and 0.25 percent, where it has been since December.
Although energy and other commodity prices have risen recently, the Fed said inflation will remain “subdued for some time.” The central bank also maintained programs intended to drive down rates on mortgages and other consumer debt and again kept the door open to making changes if economic conditions warrant.
The widely expected decisions seemed to disappoint investors. The Dow Jones industrial average, which had added about 50 points right before the announcement, gave back all the gains and was down 23 points for the day.
The 1.8 percent increase in durable goods orders in May reported by the Commerce Department was far better than the 0.6 percent decline that economists expected. It matched the rise in April, with both months posting the best performance since December 2007, when the recession began.
Orders for nondefense capital goods, a proxy for business investment plans, jumped 4.8 percent, the biggest increase since September 2004. That could signal that businesses have stopped trimming their investment spending.
The back-to-back monthly gains in orders for durable goods — items expected to last at least three years — were further evidence that a dismal stretch for U.S. manufacturers may be nearing an end. Rebecca Blank, undersecretary of commerce for economic affairs, cautioned against reading too much into the big jump in durable goods orders due to the volatile nature of the data. But she said the report appears to show that the recent plunge in activity has subsided.
Private economists also were cautious. They noted all the problems still facing the economy, including rising unemployment, record levels of home foreclosures and spreading global economic weakness that’s depressing U.S. exports.
“The U.S. factory sector still has a long way to go and is facing the headwind of one of the deepest global contractions in a generation,” said Cliff Waldman, an economist with the Manufacturers Alliance/MAPI.
Brian Bethune, chief U.S. financial economist at IHS Global Insight, was a bit more optimistic. He said the economy was nearing a turning point “from recession to recovery.”
The other Commerce Department report showed new-home sales showed dropped 0.6 percent in May to a seasonally adjusted annual rate of 342,000, from a downwardly revised April rate of 344,000. Economists had expected a sales pace of 360,000 last month, according to Thomson Reuters. Sales were down nearly 33 percent from May last year.
The median sales price, $221,600, was down 3.4 percent from a year earlier but up 4.2 percent from April.