Double Dip Recession?... Or slow growth recovery where market will continue to climb the wall of worry HIGHER?
U.S. February Durables Orders Rise 1.5%; Excluding Transportation Declines
Washington, March 26 (Bloomberg) -- U.S. new orders for durable goods excluding aircraft and other transportation equipment unexpectedly dropped in February, a sign the recovery in manufacturing will be slow to take root.
The 1.3 percent decrease to $124.1 billion followed a revised 0.2 percent rise the previous month, the Commerce Department said. Bookings fell for computers, semiconductors and metals. Orders for all durable goods rose 1.5 percent in February, reflecting a surge in aircraft demand, after rising a revised 1.3 percent.
While some manufacturers such as General Motors Corp. are expanding production schedules to keep up with better-than- expected sales, others like Oracle Corp. say a full-fledged rebound is still months away.
Conditions for a rebound in the economy ``are in place,'' said Federal Reserve Bank of New York President William McDonough, in a speech to the National Association for Business Economics. Still, business plant-use rates ``are so low, it may be too early to expect a full-blown recovery'' in business investment, which ``remains the weakest sector of the economy.''
The report followed comments earlier from Dallas Fed President Robert McTeer that there's no hurry for central bankers to raise the overnight bank lending rate, currently at a four- decade low of 1.75 percent.
``Sooner or later, as the economy gathers momentum and gets stronger, an adjustment will have to be made, but I'm in no hurry,'' McTeer said in an interview at a European Banking and Financial Forum in Prague.
Consumer Confidence
A separate report from the Conference Board showed consumer confidence surged in March to the highest level since August. The gauge of sentiment rose to 110.2 during the month from 95 in February. Expectations for the economy six months from now soared to the highest in 1 1/2 years.
Treasury securities erased earlier gains after the confidence report. The 4 7/8 percent note maturing in February 2012, which rose as much as 5/8 point after McTeer's comments and the manufacturing report, rose 1/8 point, pushing down the yield 2 basis points to 5.38 percent. A basis point is 0.01 percentage point.
Stocks surged on signs the economy is recovering. The Dow Jones Industrial Average rose 119 points, or 1.2 percent, while the Nasdaq Composite Index increased 23 points, or 1.2 percent.
The economy may expand at a 4.1 percent annual pace in the current quarter, based on the median of 36 forecasts in a Bloomberg News survey. Gross domestic product grew at a 1.4 percent rate in the fourth quarter of 2001 after contracting in the third.
Expectations
The decline in orders excluding transportation was the first drop since September. Analysts had expected a 0.7 percent rise in those bookings for February. They also expected all durable goods orders to rise 1 percent to $179.8 billion after a previously reported increase of 2 percent in January. Durable goods are products such as semiconductors, airplanes and cars made to last three or more years.
The report also showed inventories of durable goods fell 0.5 percent in February, after declining 0.9 percent. Shipments fell 3.2 percent last month.
Orders for computers and electronic products fell 2.4 percent last month after rising 3.3 percent. Semiconductor orders dropped 8.9 percent after rising 21.3 percent. Bookings for primary metals fell 3.1 percent after a 2.3 percent increase in January.
Oracle, the world's largest database-software maker, said this month that profit for the current quarter will fall short of an earlier forecast because customers are spending less. Still, demand isn't likely to fall much more, the company said.
`Worst Is Over'
``I think the worst is over in terms of demand being low,'' said Jeff Henley, Oracle's chief financial officer, in an interview with Bloomberg Television last week. He said demand won't return to normal for 12 months to 18 months, though there ``will be some small pickup in the interim period.''
Non-defense capital goods orders, including aircraft, rose 4.9 percent in February after decreasing 2.1 percent a month earlier, the report showed. Non-defense capital goods shipments fell 0.8 percent after rising 0.4 percent.
The increase was due to a 41 percent surge in orders for aircraft and parts. Boeing Co., the world's biggest airplane maker, said it received two aircraft orders last month, down from 104 in January. The government's figures don't always track industry data in the same month and it's likely the increase in February captured the orders reported by Boeing in January.
A general improvement in profits is necessary to prompt companies to increase investing in new equipment and software, analysts said. More spending by businesses will help sustain manufacturing beyond the temporary boost provided by the replacement of depleted inventories.
Recovery `Several Months Away'
That may not happen for several months, said Anthony Santomero, president of the Philadelphia Fed in a speech last week. ``My own expectation is that a strong turnaround in business investment spending is several months away,'' he said. ``It will occur only when the recovery gets fully under way and better corporate financials enable firms to begin investing again.''
Today's report showed orders for automobiles and parts fell 5.9 percent in February, following a 5.3 percent increase the previous month and a 1 percent rise in December. Orders for automobiles are 4.1 percent higher than they were in February of last year.
General Motors, the largest automaker, said it plans overtime this week at seven plants, including four that make light trucks and three that build cars, as discounts and no-interest financing continue to attract more buyers than expected. Carmakers sold last month a total of 16.7 million vehicles at an annual rate, the most in three months.
Communications equipment orders rose 0.9 percent last month after rising 7.3 percent in January.
An increase in defense-industry orders as the nation continues the fight against terrorism is also helping to underpin factories. Orders for defense hardware jumped 78.6 percent last month after decreasing 20 percent in January.
Excluding defense, durable goods orders fell 0.2 percent after a 1.4 percent increase.
Boeing and Textron Inc.'s Bell Helicopter unit were awarded a $770 million contract for 11 ``Osprey'' tilt-rotor aircraft, the Department of Defense said last week. The contract is to continue development of the plane and covers work through August 2005.
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Best regards, J.T. |
