Evidence that the 16-month recession is coming to an end continues to build

TO BE NOTED: From Bloomberg:

"Goods Orders, Home Sales Probably Rose: U.S. Economy Preview

By Courtney Schlisserman

May 24 (Bloomberg) -- Orders for durable goods and home sales probably rose in April as the worst U.S. recession in at least half a century started to loosen its grip, economists said before reports this week.

Bookings for goods meant to last several years increased 0.4 percent, the second gain in three months, according to the median forecast in a Bloomberg News survey ahead of a Commerce Department report May 28. Combined sales of new and existing homes likely advanced to a 5.02 million annual rate from a 4.93 million pace in March, other figures may show.

Stabilization in housing and manufacturing, the two areas suffering the biggest contractions, will help ease the economic slump. Still, gains will be difficult to sustain in coming months as banks remain hesitant to lend and unemployment climbs, underscoring projections from Federal Reserve officials and private economists that a recovery will be subdued.

“Evidence that the 16-month recession is coming to an end continues to build,” said David Resler, chief economist at Nomura Securities International Inc. in New York. “Home sales and building activity seem to be stabilizing and manufacturing surveys point to smaller production cuts and smaller job losses.”

An increase in orders for durable goods would follow a 0.8 percent drop in March. The Commerce Department’s report may also show bookings excluding transportation equipment fell 0.3 percent last month, according to the Bloomberg survey.

Orders Steady

United Technologies Corp., the maker of Pratt & Whitney jet engines and Carrier air conditioners, last week maintained its profit forecast for the year as order rates stabilized across its divisions since March.

There are some “early signs” of price stabilization in some markets, Chief Executive Officer Louis Chenevert said at a conference May 19, citing benefits from stimulus programs in the U.S. and in China for the Carrier and Otis divisions. Demand at the commercial and business jet aerospace units may have peaked in 2008 and will take several years to recover, he said.

Boeing Co., which saw a gain in bookings last month that probably contributed to the increase nationally, is among companies trying to make it easier for customers to get credit. Its financing arm may tap debt markets for as much as $800 million this year to help clients fund purchases, Chief Financial Officer James Bell said last week.

Cancellations at Boeing, the second-largest commercial- plane maker and defense contractor, have paralleled new orders this year. The Chicago-based company is cutting 10,000 jobs and reducing or postponing production of some models next year.

Auto Slump

Automakers continue to struggle. Chrysler LLC this month idled its 22 U.S. plants after filing for bankruptcy. General Motors Corp. also has cut output as a bankruptcy deadline looms.

Sales of existing houses, which account for more than 90 percent of the market, rose 2 percent in April to a 4.66 million annual rate from a 4.57 million pace the prior month, according to the survey median. The National Association of Realtors’ report is due May 27.

A day later, Commerce Department figures may show new-home sales increased 1.1 percent to a 360,000 annual rate, the most this year, the survey showed.

Toll Brothers Inc., the largest U.S. builder of luxury homes, said last week signs were beginning to emerge that the worst was over. The Horsham, Pennsylvania-based company said fiscal second-quarter revenue fell 51 percent from the same period last year as banks cut lending and demand sagged.

More Deposits

Deposits from buyers per community rose in seven of the past nine weeks compared with last year, Chief Executive Officer Robert Toll said on a May 20 conference call with analysts. The increase made him “slightly more optimistic,” Toll said.

“We believe the U.S. government’s forceful intervention in the capital markets has begun to restore some confidence that the financial system is on the road to stabilization,” Toll said.

A report tomorrow may show the decline in home prices that began almost three years ago is moderating. Property values in 20 of the largest metropolitan areas probably dropped 18.4 percent in March from the same month last year compared with an 18.6 percent decline in February, economist project figures from S&P/Case-Shiller will show.

The rebound in stocks and easing of the housing slump are helping to make Americans less pessimistic. The Conference Board’s gauge of consumer confidence, also due tomorrow, may rise to 43 for May, a six-month high, from 39.2 last month.

Finally, revised data from the Commerce Department on May 29 may show the U.S. economy contracted in the first quarter less than initially estimated, reflecting a smaller decline in inventories and a narrower trade gap.

                         Bloomberg Survey

================================================================
                       Release    Period    Prior     Median
Indicator                 Date               Value    Forecast
================================================================
Case Shiller Monthly YO   5/26     March     -18.6%    -18.4%
Consumer Conf Index       5/26      May       39.2      43.0
Exist Homes Mlns          5/27     April      4.57      4.66
Exist Homes MOM%          5/27     April     -3.0%      2.0%
Durables Orders MOM%      5/28     April     -0.8%      0.4%
Durables Ex-Trans MOM%    5/28     April     -0.7%     -0.3%
Initial Claims ,000’s     5/28     23-May     631       630
Cont. Claims ,000’s       5/28     16-May     6662      6740
New Home Sales ,000’s     5/28     April      356       360
New Home Sales MOM%       5/28     April     -0.6%      1.1%
GDP Annual QOQ%           5/29      1Q P     -6.1%     -5.5%
Personal Consump. QOQ%    5/29      1Q P      2.2%      2.0%
GDP Prices QOQ%           5/29      1Q P      2.9%      2.9%
Core PCE Prices QOQ%      5/29      1Q P      1.5%      1.5%
Chicago PM Index          5/29      May       40.1      42.0
U of Mich Conf. Index     5/29     May F      67.9      68.0
================================================================

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net.

Durable goods orders unexpectedly climbed during February, but demand in the prior month was revised down deeply

TO BE NOTED: From EconomPic Data:

"Durable Goods: Good News Alert? Not Necessarily

WSJ reports:

Durable goods orders unexpectedly climbed during February, but demand in the prior month was revised down deeply, an adjustment countering the idea of a rebound in the slumping manufacturing sector. Manufacturers' orders for long-lasting goods increased by 3.4% last month to a seasonally adjusted $165.56
billion, the Commerce Department said Wednesday.

The 3.4% increase was a big surprise. Wall Street expected a decline of 2.0% for February. It was the largest increase since 4.1% in December 2007. But durables, which are goods designed to last at least three years, plunged 7.3% in January, revised way down from a previously estimated 4.5% decrease. Year over year, February durables were 28.4% lower, in unadjusted terms.

Source: Census

Posted by Jake at 6:10 AM

"Consumer spending in the U.S. fell less than forecast"

Interesting news on Bloomberg:

"By Bob Willis and Courtney Schlisserman

Dec. 24 (Bloomberg) -- Consumer spending in the U.S. fell less than forecast as cheaper gasoline left Americans with more cash( GOOD NEWS ), while jobless claims climbed to a 26-year high( BAD NEWS ), signaling purchases will keep sliding into 2009.

Spending dropped 0.6 percent in November, and rose for the first time in six months after accounting for inflation, the Commerce Department said today in Washington. First-time unemployment benefit claims jumped to 586,000( BAD NEWS ), and durable-goods orders declined less than anticipated( GOOD NEWS ), other reports showed.

The deteriorating job market means consumers will probably further rein in spending( TRUE ); economists including those at Morgan Stanley estimate more than 400,000 people will lose their jobs this month. The outlook forced Sears Holdings Corp., the largest U.S. department-store company, earlier this month to abandon its earnings forecast for the rest of the year.

“The economy continues to struggle and unfortunately the first half( I AGREE ) of 2009 does not look very good,” said Carl Riccadonna, a senior U.S. economist at Deutsche Bank Securities Inc. in New York. “We look for a further contraction and a continued acceleration in the pace of layoffs.”

Gasoline prices fell by a total of 50 percent in October and November, and discounts by retailers from Toys “R” Us Inc. to Wal-Mart Stores Inc. helped prevent a bigger drop in purchases last month. Today’s Commerce report also showed that the gain in spending adjusted for inflation was the biggest in almost two years( GOOD NEWS ).

Spending Outlook

“The increase in real spending is unlikely( UNLIKELY IS FINE ) to be sustained with the job losses we are seeing,” said Benjamin Reitzes, an economist at BMO Capital Markets in Toronto. The gain last month “was more a technicality based on the drop in gasoline prices( HOWVER<>

Stocks were little changed after today’s reports. The dollar remained lower, while Treasuries advanced. The Standard & Poor’s 500 Stock Index was up 0.2 percent at 864.56 at 10:14 a.m. in New York, benchmark 10-year note yields slipped to 2.17 percent from 2.18 percent late yesterday, and the dollar lost 0.5 percent against the euro to $1.3994.

A separate Commerce report showed orders for durable goods in November fell 1 percent( NOT BAD ), after an 8.4 percent decrease in October that was bigger than previously reported. Excluding a slump in transportation gear, orders for goods designed to last several years unexpectedly increased.

Capital Goods

Bookings for non-defense capital goods excluding aircraft, a measure of future business investment, increased 4.7 percent( GOOD NEWS ), the most since September 2006, after a 6.6 percent slump in October. Shipments of those items, used in calculating gross domestic product, rose 0.2 percent( GOOD NEWS ).

“Orders were so down in the previous months that there’s probably a little payback for that( WE'LL TAKE IT. HOWEVER, THIS WOULD SUPPORT MY VIEW THAT WE WENT DOWN MORE THAN WE WOULD FUNDAMENTALLY HAVE DUE TO THE FEAR AND AVERSION TO RISK ),” Robert Stein, senior economist at First Trust Advisors in Lisle, Illinois, said before the report.

Today’s Labor Department report showed that the four-week moving average of claims, a less volatile measure, also was the highest since 1982, at 558,000 for the week to Dec. 20. Initial claims were projected to increase to 558,000, according to the median of 32 forecasts in a Bloomberg News survey.

The number of people staying on benefit rolls fell to 4.37 million in the week ended Dec. 13 from 4.387 million.

Rising joblessness contributed to a drop in personal income last month. The Commerce figures showed income fell 0.2 percent in November after being unchanged the prior month( NOT GOOD ).

Hit to Income

“Given the further increase in jobless claims,” wage and salary income “is likely to further decelerate in the near term,” Deutsche’s Riccadonna wrote in a note to clients.

The drop in consumer spending last month extended declines to a record fifth consecutive decline, the Commerce Department said. Economists forecast unadjusted spending would fall 0.7 percent, according to the median of 64 estimates in a Bloomberg News survey.

Today’s report also confirmed inflation is retreating as demand wanes. Prices plunged 1.1 percent, also the biggest since records began in 1992. The gauge increased 1.4 percent from November 2007, the smallest gain in six years. The Fed’s preferred price measure, which excludes food and fuel, was unchanged for the second consecutive month, the first time that’s happened since 1999.( TRUE )

Gasoline Price

The average price of unleaded regular gasoline at the pump fell by $1 to $2.11 in November from the prior month, according to AAA, leading the drop in overall prices.

The decrease in spending pushed the savings rate up to 2.8 percent from 2.4 percent in October. A positive rate suggests consumers are restraining spending to boost savings( THIS RATE IS FINE ).

Even after the bump in November sales, retailers are concerned about the holiday shopping season, which brings in one- third or more of annual revenue. The International Council of Shopping Centers and Goldman Sachs Group Inc. said yesterday that November-December sales may fall as much as 2 percent. The ICSC had previously projected a drop of as much as 1 percent.

“Given the current economic and retail environment, we will carefully evaluate alternatives that provide financial flexibility in the near-term,” Sears’s interim Chief Executive Officer W. Bruce Johnson said in a statement.

Consumer spending dropped at a 3.8 percent annual pace in the third quarter( NOT GOOD ), the biggest plunge since 1980, revised Commerce figures showed yesterday. The economy shrank 0.5 percent. Economists surveyed by Bloomberg forecast the economy will contract through the first half of 2009."

A better report than expected.