U.S. factory orders continue climb

April’s 0.7% rise marks third-straight monthly increase

A Cummins Inc. employee works on a diesel truck engine assembly line at the Cummins Mid-Range Engine Plant in Columbus, Ind., on Monday. Orders to U.S. factories rose for a third consecutive month in April, the Commerce Department said Tuesday.
A Cummins Inc. employee works on a diesel truck engine assembly line at the Cummins Mid-Range Engine Plant in Columbus, Ind., on Monday. Orders to U.S. factories rose for a third consecutive month in April, the Commerce Department said Tuesday.

WASHINGTON -- Orders to U.S. factories rose for a third consecutive month in April, adding to evidence that manufacturing is regaining momentum after a harsh winter.

Orders increased 0.7 percent in April, pushed higher by a surge in demand for military hardware, the Commerce Department reported Tuesday. That was after a 1.5 percent increase in March and a 1.7 percent climb in February.

The improvements were preceded by two big declines in January and December, which partly reflected a harsh winter. A key category viewed as a proxy for business investment plans fell by 1.2 percent in April, though that drop came after a 4.7 percent surge in March.

The three solid monthly gains in factory orders should provide support to the overall economy, which is expected to stage a robust rebound in the April-June quarter.

The economy, as measured by the gross domestic product, shrank at an annual rate of 1 percent in the January-March quarter, reflecting winter storms that disrupted business activity. But in the current quarter, analysts estimate GDP will advance at an annual rate as high as 3.8 percent.

Economists say that growth will remain strong in the second half of this year as consumer spending benefits from rising employment, which is providing households with more income.

The report on factory orders showed that demand for durable goods, items expected to last at least three years, increased 0.6 percent in April. Orders for nondurable goods such as paper and chemicals rose 0.7 percent in April after a drop of 0.5 percent in March.

The overall increase reflected a sharp rise in demand for defense products including airplanes and communications equipment. Excluding defense, orders fell 0.1 percent in April.

Transportation orders grew 1.4 percent despite the fact that orders for commercial aircraft, a volatile category, dropped 7.9 percent and demand for autos and auto parts slipped 0.2 percent.

Demand for machinery fell 2.8 percent, with orders for construction equipment down 7.2 percent. Orders for computers dropped 13.2 percent, while demand for electrical appliances and other electrical products rose 1.3 percent.

Economists expect factory activity will strengthen in coming months, helped by rising consumer demand and a rebound in U.S. export sales.

The Institute for Supply Management reported Monday that its manufacturing index showed a rise in May to a solid reading of 55.4. Any reading above 50 indicates expansion in the manufacturing sector.

The data suggested that manufacturing is expanding at a healthy pace and should help the economy recover from its weak start at the beginning of the year.

U.S. home prices rose in April compared with a year earlier, data provider CoreLogic said Tuesday, but the increase was the smallest annual gain in 14 months. Price gains have slowed this year as sales have faltered.

Prices rose 10.5 percent in April from 12 months earlier. That is a healthy gain, but it is down from March's 11.1 percent increase and February's 12.2 percent rise.

On a month-to-month basis, April prices rose 2.1 percent. But CoreLogic's monthly figures aren't adjusted for seasonal patterns, such as fair spring weather.

Higher mortgage rates, tight credit and a limited supply of available homes have slowed the housing recovery. Sales of previously owned homes ticked up in April after falling to a 20-month low in March. They were still 6.8 percent lower than a year ago.

Prices rose in the 12 months ending in April in every state, CoreLogic said. The states with the biggest price gains were California, 15.6 percent; Nevada, 14.8 percent; Hawaii, 14.1 percent; Oregon, 11.8 percent; and Michigan, 11.3 percent.

Ninety-five of the 100 largest metro areas reported higher prices in April compared with a year earlier. The five that did not record an increase were: Little Rock, Hartford, Conn.; Milwaukee; Worcester, Mass.; and New Haven, Conn.

Nationwide, home prices are still 14.3 percent below the peak they reached in April 2006, when the housing bubble began to deflate. But in 23 states, prices are at or within 10 percent of their previous peaks, according to CoreLogic's figures.

Housing began to recover in 2012, but sales of existing homes stalled after mortgage rates jumped last spring. Most economists forecast that sales will barely rise this year from 2013's pace of 5.1 million. Sluggish sales, in turn, will slow annual price gains this year to roughly 5 percent or 6 percent, economists predict.

Information for this article was contributed by Martin Crutsinger and Christopher S. Rugaber of The Associated Press.

Business on 06/04/2014

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