LITTLE ROCK — U.S. factories received more orders for long-lasting manufactured goods in May, rebounding after two weak months.
The Commerce Department said Wednesday that orders for durable goods rose 1.1 percent in May after two months of declines.
And so-called core capital goods, which signal business investment plans, increased 1.6 percent. That also followed two months of declines, which raised concerns that businesses were losing confidence in the economy. Companies ordered more heavy machinery, computers and communication equipment in May.
But the trend in orders has slowed this year, adding toworries that the U.S. economy has weakened.
“May looked OK, but the trend is still relatively soft,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “It’s soft, but it’s not collapsing.”
“Manufacturing is probably going to slow here” in the middle of the year, Feroli said.
Durable goods are items that are expected to last at least three years. Orders can be volatile from month to month.
“All in, the improvement in May is, again, a relief,” said Jennifer Lee, a senior economist at BMO Capital Markets. “However, smoothing out the monthly wiggles in core orders shows a decelerating trend.”
In May, orders rose to $217.2 billion, 46 percent above the recession low hit in April 2009. Orders are still 11.4 percent below their 2007 peak.
U.S. manufacturing has been a key driver of growth since the recession ended three years ago. But Europe’s debt crisis has weakened demand for U.S. exports. And several other reports suggest the factory activity has slowed.
Factories produced less in May than April, the Federal Reserve said earlier this month. Automakers cut back on output for the first time in six months.
In June, manufacturing activity barely grew in the New York region and contracted sharply in the Philadelphia area, according to surveys by regional Federal Reserve banks.
The May durable-goods report showed orders for transportation products increased 2.7 percent, led by a 4.9 percent gain in volatile demand for commercial aircraft. Orders for motor vehicles and parts rose 0.5 percent after a 5.7 percent surge in April.
Excluding transportation, durable-goods orders rose 0.4 percent.
Demand for machinery rose 4.1 percent. Orders for computers and related products were up 3.3 percent, and orders for communications equipment increased 2.3 percent. Orders for primary metals such as steel fell 1.5 percent.
In a separate report, the National Association of Realtors said Wednesday that Americans signed more contracts to buy previously occupied homes in May, matching the fastest pace in two years.
The increase suggests consumers are gaining confidence in the housing market and that modest recovery will continue.
The index of sales agreements increased to 101.1 last month from 95.5 in April. That matches March’s reading, the highest since April 2010, when a home-buying tax credit boosted sales.
A reading of 100 is considered healthy. The index is 13.3 percent higher than it was a year ago. It bottomed at 75.88 in June 2010, after the tax credit expired.
The increase supports other data showing steady improvement in the housing market this year, even as hiring slumps and consumer confidence sags.
Sales of new and previously owned homes are up over the 12 months. Builders are starting more projects. And prices are rising in most markets.
“Despite the gloom in much of the recent economic data, housing continues to show real signs of life,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
The economy benefits when home sales rise. Buyers typically spend more on renovations, furniture, appliances and landscaping.
There’s also a psychological factor. In good times, most homes rise in value. When homes appreciate, people feel they have more money. So they spend more. Consumer spending drives roughly 70 percent of economic activity.
It typically takes one to two months for buyers to close on a home after signing a contract. So the increase in signed contracts suggests completed home sales will rise this summer. That could drive prices higher and encourage morepeople to put homes on the market.
Home prices increased in 19 of 20 major U.S. cities in April from March, according to the Standard & Poor’s/Case-Shiller index released Tuesday. A measure of national prices rose 1.3 percent in April, the first increase in seven months.
“The economy is growing, but it’s still muddling through,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, who forecast a gain in durable-goods orders and pending home sales. “Concerns about the collapse of manufacturing are grossly overblown. We’re in a housing recovery.” Information for this article was contributed by Martin Crutsinger and Christopher S. Rugaber of The Associated Press and by Shobhana Chandra and Michelle Jamrisko of Bloomberg News.
Business, Pages 21 on 06/28/2012