Durable goods orders surge in May, but new-home sales dip

WASHINGTON -- Orders to factories for big-ticket manufactured goods rose sharply for a second straight month in May, and a key indicator of business investment surged by the largest amount in nearly five years. But another report showed that new-home sales dipped in May, as the bumpy economic recovery continues.

The Commerce Department said Wednesday that demand for durable goods rose 1.8% last month, far better than the 0.6% decline that economists expected. It matched the rise in April, with both months posting the best performance since December 2007, when the recession began.

Orders for non-defense capital goods, a key proxy for business investment plans, jumped 4.8%, the biggest increase since September 2004. That could signal that businesses have stopped trimming their investment spending.

The back-to-back monthly gains in orders for durable goods, or items expected to last at least three years, were further evidence that a dismal stretch for U.S. manufacturers may be nearing an end. Still, analysts say any sustained rebound is still months away.

The Commerce Department said separately that new-home sales dropped 0.6% in May to a seasonally adjusted annual rate of 342,000, from a downwardly revised April rate of 344,000.

Sales were down nearly 33% from May last year.

May's results missed economists' expectations of a 360,000 sales pace, according to Thomson Reuters.

The median sales price of $221,600 was down 3.4% from a year earlier but still up 4.2% from April.

American companies have been forced to trim millions of workers as they struggle with the longest U.S. recession since World War II. U.S. businesses also have faced a sharp drop in exports as many major overseas markets struggle with their own downturns.

Excluding transportation, orders for durable goods posted a 1.1% rise in May, also better than the 0.4% drop that had been expected.

Demand for transportation products rose 3.6%, reflecting a 68.1% surge in orders for commercial aircraft, a volatile category that had fallen 1.4% the previous month.

The big increase in aircraft offset continued weakness in the troubled auto sector. Demand for motor vehicles and parts fell 8.1% in May, reflecting major disruptions from the bankruptcy filings at Chrysler and General Motors.

Orders for machinery rose 7.7%, while demand for computers and related products surged 9.4% last month.

The overall economy, as measured by the gross domestic product, shrank at annual rates of 6.3% in the final three months of last year and 5.7% in the January-March quarter. That was the worst six-month stretch for the GDP in more than 50 years. The government is scheduled to revise the first-quarter GDP figure Thursday, but analysts expect that revision will leave the overall figure unchanged.

Many economists believe that GDP in the current quarter will show a much smaller decline of around 2% with growth returning in the second half of this year.

But they do not expect the unemployment rate will turn around quickly. The jobless rate jumped to a 25-year high of 9.4% in May and many economists believe it could top 10% before the recovery gains enough strength to push unemployment lower.