Home sales and orders for long-lasting goods probably climbed in March, increases that enhance the odds the US recovery will be sustained, economists said before reports this week.
Purchases of new and existing homes rose to a combined 5.63 million annual rate, the first gain in four months, according to the median estimate of economists surveyed by Bloomberg News. Bookings for goods meant to last several years may have advanced for a fourth straight time.
The advances in durable goods would be the longest since 2005, highlighting how manufacturing is at the forefront of the economic rebound as global demand strengthens. The improvement in housing, meanwhile, is more dependent on help from the federal government as buyers rush to beat a deadline to qualify for a tax credit, indicating the industry will take time to rally.
“Business spending does seem to be picking up and I think that is going to be one of the key elements for the expansion,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. On housing, “anything we get on the positive side would be an improvement.”
Reports last week showed builders turned less pessimistic in April and housing starts for March were at the highest level in more than a year.
Sales Breakdown
Sales of previously owned houses probably rose to a 5.3 million annual rate in March from a 5.02 million pace a month earlier, an April 22 report from the National Association of Realtors may show. A day later, data from the Commerce Department may show purchases of new homes climbed 5.5 percent to a 325,000 rate, acco rding to the survey median.
The Obama administration in November extended a credit for first-time homebuyers and expanded it to include some current owners. The deadline for signing purchase contracts is the end of this month, and transactions must be completed by June 30.
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“There is potential for sales to jump a bit” in coming months ahead of the deadline, said Aaron Smith, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania.
After that, the state of the labor market, mortgage rates and developments surrounding foreclosures, which are depressing property values and adding to already bloated inventories, will determine housing’s fate, Smith said.
The outlook for factories is less ambiguous as improving economies overseas propel exports and rising US demand prompts companies to update equipment and boost stockpiles. Orders for durable goods probably increased 0.2 per cent last month after rising 0.9 per cent in February, a Commerce Department report on April 23 may show.
Sales overseas rose in February to the highest level since October 2008, the Commerce Department reported last week. Manufacturing last month expanded at the fastest pace since 2004, according to a national survey of purchasing managers.
General Electric Co. “saw encouraging economic signs,” in the first quarter, Chief Executive Officer Jeffrey Immelt said in a statement April 16. The company expects results this year to be little changed from 2009 with “upside potential,” Immelt said.
GE now gets more than half of its revenue from outside the US Immelt increased the research budget in total by about 7 per cent and has said he plans to boost it more this year. In the first quarter, GE raised its research and development investment by 16 per cent, Immelt said.
GE has been the biggest contributor to the advance in the Standard & Poor’s 500 Index so far this year, boosting the gauge by 4.3 points. The S&P Supercomposite Machinery Index, which includes Caterpillar Inc and Deere & Co, is up 16 per cent since December 31, more than double the 6.9 per cent gain in the broader 500 index.
A report tomorrow may show the economic recovery is gaining momentum. The index of leading indicators, a measure of the outlook over the next three to six months, probably rose 1 per cent last month, a 12th consecutive advance, according to the survey median before figures from the New York-based Conference Board.
Finally, another report this week may show inflation is contained. Economists surveyed projected wholesale prices excluding food and energy costs rose 0.1 per cent in March, the same as the prior month, according to the survey median.
Volatility in fuel costs, may have caused overall producer prices to rise 0.5 per cent after falling 0.6 per cent in February, the survey showed. The Labor Department’s report is due April 22.