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 reported. The National Association of Realtors said separately that Americans signed fewer contracts to buy previously owned homes, with its index unexpectedly dropping to a five-year low.
Demand for computers, electronics and fuel helped make up for a decline in aircraft bookings in May, the Commerce Department reported. 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.
Investors shrugged off the housing report, with Treasury securities dropping and stocks rising. The yield on the benchmark 10-year note closed up at 5.04 percent yesterday in New York. The Standard & Poor's 500 added 5.44 to 1,524.87.
The Realtors group said its index of signed purchase agreements, or pending sales of existing homes, dropped 3.5 percent to 97.7, from a revised 101.2 in April.
Economists expected pending sales to rise 0.5 percent, after originally reporting a decline of 3.2 percent in April, 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.
Yesterday's report showed that the May reading was the lowest level since September 2001, when the economy was in the midst of the last recession. April pending sales of existing homes were revised to a decline of 3.5 percent.
Pending sales of existing homes decreased 13.3 percent from May 2006. The measure of pending sales of existing homes is considered a leading indicator of sales because it tracks contract signings. The Realtors association's existing-home sales report tracks closings, which typically occur a month or two later.
Tighter mortgage lending standards are "having a larger disruption than what we had been anticipating," said Lawrence Yun, an economist for the Realtors group in Washington.
Fed officials have said the housing slump may take longer to ease than previously anticipated. They kept the target overnight interest rate unchanged at 5.25 percent last week and reiterated that the economy will continue to grow at a "moderate" pace.
Orders for durable goods, which make up about 55 percent of factory demand, fell a revised 2.4 percent after a 1 percent gain in April. The government last week, in a preliminary estimate, reported a 2.8 percent decline in durables orders for May.
Orders for capital goods excluding aircraft and military equipment, a measure of future business investment, fell 2.1 percent after rising 2 percent.
The Commerce Department had previously estimated a 3 percent drop. Shipments of these goods, part of the government's calculation of the nation's gross domestic product, rose 0.1 percent after a gain of 0.9 percent in April.
Business fixed investment, which includes spending on software and equipment, will probably grow at an annual rate of 6.4 percent this quarter, up from a 2.6 percent pace in the first quarter, according to Lehman Brothers Holdings Inc. Such spending fell 3.1 percent in the final three months of last year.