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US durable good orders down in March

SLOW RECOVERY Manufacturers such as General Electric are hurting, with first quarter profits dropping 35 percent because of real estate losses and rising consumer defaults


Orders for US durable goods and home sales probably retreated last month after rebounding the previous month, showing any economic recovery will be slow to develop, economists said before reports are released this week.

Bookings for goods meant to last several years fell 1.5 percent, the fifth drop in six months, the median forecast in a Bloomberg News survey said ahead of a US Commerce Department report on Friday. Combined sales of new and existing homes likely decreased to a 5.02 million annual rate, down from a 5.06 million pace in February, other figures may show.

Companies may not invest in new equipment nor add to payrolls until sales here and abroad show sustained gains and government efforts to stem the recession take hold. Record foreclosures are adding to the glut of properties on the market, leading to a drop in values that helps stabilize sales even as it hurts builder profits.

“It’s not a good environment for capital spending,” said Michael Feroli, an economist at JPMorgan Chase & Co in New York. “Housing doesn’t seem to be getting worse, which is good, because you’ve got to crawl before you can walk.”

A decline in orders for durable goods would follow a 3.5 percent jump in February. The Commerce Department’s report may also show bookings excluding transportation equipment dropped 1.2 percent last month, the Bloomberg survey showed.

Automakers continue to struggle. General Motors Corp (GM), operating with US$13.4 billion in US loans, will probably still need US$4.6 billion in additional aid this quarter, chief executive officer Fritz Henderson said last week. GM will file for bankruptcy protection unless it can restructure out of court by June 1, he said.

Other manufacturers are also hurting. General Electric Co, the world’s biggest supplier of power-plant turbines, jet engines and private-label credit cards, last week said its first-quarter profit fell 35 percent. The Fairfield, Connecticut-based company was hurt by real-estate losses, rising consumer-credit defaults and slumping demand for medical equipment.

“The global environment remains challenging,” chief executive officer Jeffrey Immelt told investors on a conference call last Friday. “While we’re seeing some positive indicators globally, we continue to be cautious.”

Sales of existing houses, which account for 90 percent of the market, fell last month to a 4.68 million annual rate, from a 4.72 million pace the prior month, the survey median showed. The National Association of Realtors’ report is due on Thursday.

A day later, Commerce Department figures may show new-home sales rose 0.9 percent to a 340,000 annual rate, the second month of gains, the survey median showed.

“Housing markets remained depressed overall, but there were some signs that conditions may be stabilizing,” including an increase in “potential buyers,” the Fed said in its Beige Book regional business survey released last Wednesday.

The Labor Department’s initial unemployment claims report this week, due on Thursday, may garner even more attention than usual. The Bloomberg survey median shows more Americans probably applied for unemployment benefits in the week ended yesterday.

First-time claims unexpectedly fell the prior week to the lowest level since January, Labor figures last Thursday showed. Another drop would be an “important sign that the labor market may be on a path to gradual recovery,” JPMorgan’s Feroli said.

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