Durable goods orders fall as concerns grow
WASHINGTON - Companies probably ordered less equipment in July as concern grew that the United States' recovery was coming to a halt, economists said before reports last week.
Bookings for durable goods excluding transportation fell 0.5 percent after rising 0.4 percent in June, according to the median forecast of 38 economists surveyed by Bloomberg News ahead of Commerce Department figures on Aug 24. Two days later, data from the same agency may show the economy grew even less in the second quarter than previously estimated.
A 16 percent plunge in stocks since July 22 reflects a loss of confidence that may prompt companies and consumers to cut back even more. Attention will shift to Ben S. Bernanke on Aug 26 to see whether the Federal Reserve chief lays out what tools the central bank is likely to use should the economy need another dose of stimulus to avert a recession.
"Businesses are very cautious, given all the uncertainty and slowing demand," said John Herrmann, senior fixed-income strategist at State Street Global Markets LLC in Boston. "Any further weakness in the manufacturing sector will undermine the integrity of the recovery."
Total orders for long-lasting goods, including the volatile transportation category, climbed 2.1 percent last month, the durables report will also show, according to the survey median.
The figures may reflect a rebound in production at vehicle makers following supply disruptions caused by the earthquake in Japan, and a jump in bookings for aircraft. Chicago-based Boeing Co, the world's largest aerospace company, said it received 115 orders in July, up from 48 a month earlier.
The Standard & Poor's Supercomposite Machinery Index, which includes companies like Deere & Co, has plunged 26 percent from the end of June to Aug 19, while the broader S&P 500 gauge has declined 15 percent.
Round Rock, Texas-based Dell Inc, the second-largest personal-computer maker, trimmed sales projections for this year, citing uncertain demand and slower spending on PCs and consumer technology.
"It's clear that the demand environment is weaker and a bit more uncertain," Chief Financial Officer Brian Gladden said during a conference call on Aug 16. The US consumer business "has gotten weaker for sure," and federal contracts are taking longer to close, while markets like China and India are growing, he said.
The policy-setting Federal Open Market Committee on Aug 9 pledged to keep its benchmark interest rate near zero until at least mid-2013. Growth is "considerably slower" than anticipated, the FOMC said in a statement. Officials "discussed the range of policy tools" available and are "prepared to employ those tools as appropriate."
Bernanke will speak on Aug 26 at the Kansas City Fed's annual conference for global central bankers in Jackson Hole, Wyoming. He used the gathering last year to hint at a second round of so-called quantitative easing, in which the Fed purchased $600 billion of Treasuries from November 2010 to June.
Bloomberg News
(China Daily 08/22/2011 page14)
