2014 Government Regulations & Business Summit
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By Shobhana Chandra and Alex Kowalski
WASHINGTON - Orders for U.S. durable goods climbed more than forecast in February as companies looked past budget squabbles in Washington and focused on expanding capacity to meet growing demand.
Bookings for goods meant to last at least three years rose 5.7 percent, the most since September, after a 3.8 percent drop the prior month, the Commerce Department said today in Washington. Other reports showed sales of new homes in February capped the best two months since 2008 and residential real- estate prices rose in January by the most since June 2006.
Stocks advanced on expectations that gains in auto and home purchases may keep benefiting manufacturers from 3M Co. to United Technologies Corp., leading to increases in output that are boosting growth. Households are also poised to keep spending as rising property values help repair finances tattered by the recession even as concern about government budget cuts shakes Americans’ sentiment.
“Businesses are feeling a bit more confident about the economy, especially the second half,” said Michael Carey, chief economist for North America at Credit Agricole CIB in New York, who projected a 6 percent gain in durable-goods orders. “The broader economy is continuing to move forward.”
The Standard & Poor’s 500 Index climbed 0.5 percent to 1,560.08 at 12:07 p.m. in New York.
Elsewhere today, a report showed South Korea’s economy expanded last quarter at the slowest pace since the global recession, underscoring the case for additional stimulus.
The median forecast of 80 economists surveyed by Bloomberg called for a 3.9 percent increase in durable-goods orders. Estimates ranged from a 0.1 percent drop to a 6.5 percent gain.
Sales of newly built homes fell 4.6 percent in February to a 411,000 annualized rate, following a 431,000 pace the prior month, another report from the Commerce Department showed. It was the best two-month showing since August and September 2008.
Residential property values in 20 cities increased 8.1 percent in January from the same time last year, the biggest 12- month gain since June 2006, according to data from S&P/Case- Shiller also issued today. The advance exceeded the 7.9 percent median forecast by economists in a Bloomberg survey.
The reports indicate manufacturing and housing were picking up heading into the automatic across-the-board federal spending cuts that began taking place on March 1 as part of the 2011 deal to increase the U.S. debt limit.
The reductions, known as sequestration, combined with other forms of fiscal tightening including the increase in the payroll tax, represent the “greatest danger” to growth, Federal Reserve Bank of New York President William C. Dudley said yesterday in a speech.
Households are showing concern that the budget cuts will hurt growth. The Conference Board’s consumer confidence index slumped to 59.7 from a three-month high of 68 in February, data from the New York-based private research group showed today. Economists surveyed by Bloomberg projected the March measure would fall to 67.5.
“The recent sequester has created uncertainty regarding the economic outlook and as a result, consumers are less confident,” said Lynn Franco, director of economic indicators at the Conference Board, said in a statement.
Other measures of consumer confidence have been more mixed. The Bloomberg Consumer Comfort monthly gauge of expectations improved to minus 4 in March from minus 7 in February, according to results of the Bloomberg Consumer Comfort Index. The weekly measure of present conditions climbed in mid March to the highest level since April.