Feb. Durable Goods Orders Jump 2.5 Pct
By Alister Bull
WASHINGTON (Reuters) March 24- New orders for long-lasting U.S. factory goods rose sharply in February as demand for aircraft soared, a government report showed on Wednesday, with new home sales also surprisingly strong.
Orders for big-ticket durable goods advanced 2.5 percent after falling a revised 2.7 percent in January, the Commerce Department said.
The number was ahead of forecasts of a 1.7 percent rise, but the underlying trend was disappointing because with transportation stripped out, orders declined.
"A significant downward revision to capital goods shipments in January and further decline in February point to much lower investment spending growth in the first quarter," Morgan Stanley economist Ted Wieseman cautioned clients.
"As a result, we cut our Q1 GDP forecast to 4.0 percent from 4.6 percent," he wrote.
In a separate report, the Commerce Department said sales of new homes rose a stronger-than-expected 5.8 percent to a seasonally adjusted 1.163 million annual pace in February.
The sales pace was the fastest since August 2003's 1.190 million clip and indicates that the housing market continues to draw support from low interest rates, which the Federal Reserve has held at a post-1958 low of 1.00 percent since last year.
In a weekly report, the Mortgage Bankers Association said applications for loans to fund home purchases fell last week, by 0.8 percent. However, applications for refinancing loans edged higher and accounted for more than 60 percent of loans processed by lenders last week.
Markets, focused on geopolitical developments, generally ignored the reports.
AIRCRAFT TAKEOFF
A 9.9 percent increase in transportation equipment drove the orders advance, chalking up the largest rise since July 2002. Excluding transportation, new orders fell 0.3 percent in February -- the first decline in three months.
Demand for military aircraft surged 61.1 percent after a 37.3 percent fall in January and civilian aircraft gained 33.8 percent after a 32.5 percent decline. Demand for motor vehicles was up 5.0 percent from a 4.4 percent retreat in January.
Non-defense capital goods orders excluding aircraft -- a proxy for business spending -- were up 1.1 percent in February after dipping 0.3 percent the previous month. Non-defense capital goods shipments fell 0.6 percent versus a 0.3 percent January dip.
Other economists said the numbers might be swinging from month to month, but underlying signs were still positive.
"The three-month average of new orders for durable goods in February 2004 is 8 percent above the same time period one year ago," said Daniel Meckstroth, chief economist for the industry-sponsored Manufacturers Alliance/MAPI.
A collapse in business investment was instrumental in tipping the United States into recession in 2001, and company spending remained sluggish in the following quarters.
This crucial economic ingredient has been picking up smartly since the last quarter of 2003, evidence of a broadening recovery that policy-makers say will eventually translate into employment gains.
HOT HOUSING
January new home purchases were revised lower to a 1.099 million rate from the initially reported 1.106 million pace.
February's results came in above Wall Street expectations of sales at a 1.098 million rate and showed homebuyers were not deterred in February, even as builders slowed construction.
Average interest rates on 30-year mortgages, the most popular home loan, rose 0.1 basis point to 5.28 percent in the week ended March 19, but were down 43 basis points from a year ago. The low rates are expected to continue to fuel refinancings, and subsequently, consumer spending.
"There is a lot interest in refinancing at these interest rates. This story still is not over," said Drew Matus, senior financial economist at Lehman Brothers.
(Additional reporting by Jonathan Nicholson in Washington and Aleksandrs Rozens in New York)
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