Washington – Factory orders fell less than predicted in May, reinforcing forecasts that manufacturing will help overcome the housing slump.
Orders placed with U.S. factories fell 0.5 percent after a 0.5 percent gain in April, the Commerce Department said in Washington.
Economists and the Federal Reserve predict growth will accelerate from its first-quarter pace, the weakest since 2002, even as housing remains a burden. Fed Chairman Ben Bernanke said last month there was no sign of “major spillovers” from the housing slide. Industry reports for June show manufacturers are raising production as businesses spend on investment.
“The second half is coming together almost perfectly according to the Fed’s plan,” said Mark Vitner, senior economist at Wachovia Corp. in Charlotte, N.C. “Housing is going to be a drag, but if we get some strength in business spending, then the economy will be able to handle it.”
Demand for computers, electronics and fuel helped make up for a decline in aircraft bookings in May, the Commerce Department report showed. Excluding transportation equipment, bookings increased 0.7 percent after rising 1 percent.
Factory orders were forecast to fall 1.2 percent after a gain of 0.3 percent reported earlier for April, according to the median estimate in a Bloomberg survey of 67 economists. Forecasts ranged from a 1.9 percent decline to a gain of 0.5 percent.
“Economic growth will be fairly healthy in the second half, though housing itself will be a drag,” said Russell Price, senior economist at H&R Block Financial Advisors in Detroit. “The factory sector is rebounding.”
The National Association of Realtors said its index of signed purchase agreements, or pending home resales, dropped 3.5 percent to 97.7, from a revised 101.2 in April.
Economists expected pending sales to rise 0.5 percent, following an originally reported decline of 3.2 percent the prior month, according to the median of 27 forecasts in a Bloomberg News survey of economists. Estimates ranged from a drop of 2.5 percent to an increase of 2 percent.
