TOPICS > Economy

After 6-Month Slide, Durable Goods Orders Jumped in Feb.

BY Admin  March 25, 2009 at 1:05 PM EDT

Fridges; photo courtesy flickr.com/squeakymarmot

Wall Street rose on the better-than-expected data. The Dow Jones industrial average added about 120 points as the latest
durable goods report showed orders rose 3.4 percent last month to $165.6
billion, the biggest increase since December 2007 when the recession began,
after a revised 7.3 percent plunge in January, previously reported as a 4.5
percent decline.

It was the first advance since July and the strongest
one-month gain in 14 months.

The Commerce Department also reported Wednesday that sales
of newly built U.S. single-family homes unexpectedly rose at their fastest pace
in 10 months in February while prices fell by a record margin from a year ago.

The report found that new home sales rose to a seasonally
adjusted annual rate of 337,000 from an upwardly revised January figure of
322,000. The results, while better than analysts expected, still were the
second-worst on record. Even after the revision to January’s results, the month
remained the worst on records dating to 1963, according to the Associated
Press.

Still, the durable goods increase is “really, very
encouraging,” said Peter Kenny, managing director at Knight Equity Markets
in Jersey City, N.J., according to Reuters. “We’ve seen a variety of
different data points that suggest that though we’re not completely done with
the deterioration in the overall economy, we’re clearly seeing signs of a
thaw.”

Some recent data, including in the retail sales and housing
sectors, have pointed to signs of a slowdown in the pace of the economic
downturn.

New orders excluding transportation rose 3.9 percent in
February, the largest gain since August 2005, the Commerce Department said.
Orders for machinery soared 13.5 percent in February, the biggest increase
since March 2004.

“Durable goods was firmer than expected but with the
caveats of downward revisions and the bounce … coming on the heels of several
months of weakness … and we don’t see an effort to interpret it as a sign the
economic bottom is in,” RBS Greenwich Capital analyst David Ader wrote in
a research note, according to the AP.

Ian Shepherdson, chief U.S. economist at High Frequency
Economics, agreed. He told the AP that the rise in orders was welcome, but
“much less impressive than it looks at first sight and it cannot possibly
last.”

“The underlying state of industry is still
deteriorating,” Shepherdson wrote in a research note.

Manufacturers have been battered by the current recession as
demand for automobiles, airplanes, household appliances, furniture and other
large goods shrinks both in the U.S. and overseas.

However, new durable goods orders excluding the volatile
transportation sector rose 3.9 percent in February, the largest gain since
August 2005, the Commerce Department said. Orders for machinery soared 13.5
percent in February, the biggest increase since March 2004.

But despite the big surge in demand for military aircraft,
overall orders for transportation products fell 0.8 percent in February. Demand
for commercial aircraft plunged 28.9 percent after a huge increase in January.
Orders for autos and auto parts dipped 0.6 percent as that industry’s struggles
persist.

One of the few weak spots in the report was civilian
aircraft and parts, which dropped 28.9 percent after Boeing reported only four
new aircraft orders in the month after 18 orders in January. Motor vehicle and
parts eased 0.6 percent after a 7.6 percent tumble in January.

Non-defense capital goods orders excluding aircraft, a
closely watched proxy for business spending, expanded 6.6 percent in February.
The prior month was revised to an 11.3 percent drop, previously reported as a
5.7 percent decline.

Inventories of manufactured durable goods fell for a second
consecutive month in February, easing 0.9 percent to $336.8 billion, after
dropping 1.1 percent in January, the department said.

On Thursday, the government is scheduled to report on the
overall economy. Economists believe that data will show the economy falling at
an annual rate of 6.5 percent in the final three months of last year, even
deeper than the 6.2 percent drop in the gross domestic product reported a month
ago, according to the AP.