Durable goods fall less than expected in March

Demand for big-ticket manufactured goods and sales of new homes were better than expected in March, raising hopes that the long slides in manufacturing and housing are slowly coming to an end.

The Commerce Department said Friday that orders for durable goods dropped 0.8% last month, about half the 1.5% decline that economists had expected. A rise in orders for commercial and military aircraft helped cushion weakness elsewhere.

The overall drop followed a 2.1% increase in February. That was the first gain after six straight declines.

New-home sales fell 0.6% last month to a seasonally adjusted annual rate of 356,000 units from a rate of 358,000 in February, the department said. February’s results were 6% higher than originally reported.

Economists surveyed by Thomson Reuters had expected a pace of 340,000 units for March.

Sales last month were down nearly 31% from March 2008.

The inventory of new homes for sale dropped 5% from February levels.

The housing results fanned optimism that developers have slashed prices and construction enough that sales have finally hit bottom. Prices, however, are likely to remain weak for months as builders continue to clear out their stock of unsold homes.

Although February’s 2.1% rise in durable goods orders was revised down from an estimate of 3.5%, that increase and the small drop in March indicate some faint signs of life in manufacturing.

Still, economists cautioned that the best that could be expected was for industrial production to stabilize. They do not expect a rebound from the current low levels any time soon because of all the problems facing the economy.

Demand for transportation products fell 1.4% in March, reflecting a continued slide in orders for motor vehicles, which dropped 1.7%, according to the government data.

That weakness was offset somewhat by increases of 4.4% in demand for commercial aircraft and 4.7% in orders for military aircraft. Despite the increase, orders for commercial aircraft were sharply lower than a year earlier because the global economic crisis has depressed demand worldwide.

Excluding transportation, durable goods orders fell 0.6% last month, just half the 1.2% decline that had been expected. Demand also dropped for machinery, computers and primary metals such as steel.

Although orders for nondefense capital goods excluding aircraft -- a category viewed as a good proxy for business investment plans -- rose 1.5%, they also were significantly lower than a year earlier because businesses have slashed efforts to expand and modernize.