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(WASHINGTON) An unexpected jump in US durable goods orders last month backed hopes that the economy was healing and this message was reinforced by a pick-up in home mortgage applications last week.
New orders for long-lasting US manufactured goods rose by a much stronger-than-expected 1.8 per cent in May, Commerce Department data yesterday showed.
Analysts polled by Reuters had forecast durable goods orders would decline 0.6 per cent last month. May's increase, the third gain in four months, followed a revised 1.8 per cent gain in April.
'The economy is bottoming here, and we're looking for the Fed to maybe change its statement slightly and maybe start to suggest a more neutral balance of risk. A nod, basically, to an exit strategy,' said Kim Rupert at Action Economics LLC in San Francisco.
Manufacturing, which accounts for about one-third of the economy, provides a good barometer for overall business health, and the May durable goods orders report showed solid gains.
New orders excluding transportation advanced 1.1 per cent last month, compared with a forecast for a 0.4 per cent decline, buoyed in part by a 7.7 per cent rise in new machinery orders.
This was the largest percentage increase in that category since March 2008, the Commerce Department said.
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New orders excluding defence were 1.4 per cent higher, versus a Reuters' poll prediction for a 0.4 per cent drop.
More importantly, non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending, jumped 4.8 per cent in May, the largest gain since September 2004. May's sharp rise compared with forecasts for a 0.6 per cent drop and followed a revised 2.9 per cent fall in April.
'The numbers point to a stabilisation, but certainly not a robust recovery,' said Keith Hembre, chief economist at First American Funds in Minneapolis.
A separate report showed that sales of new US single-family homes slipped slightly in May, according to Commerce Department data yesterday, pointing to conditions in the hard-hit housing market remaining fragile.
The annual sales pace of 342,000 was a 0.6 per cent decline from April. Economists polled by Reuters had forecast sales would notch a 360,000 rate. It also remained far below the 509,000 annual pace of May 2008.
But the median sales price rose to US$221,600 from US$212,600 in April and was the highest since December, when it was US$229,600. The median marks the half-way point, with half of all houses sold above that level and half below. - Reuters
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