New orders for long-lasting U.S. manufactured goods were unchanged in May after two consecutive months of decline, government data Wednesday showed, while a key barometer of business confidence fell less than expected.
Analysts polled by Reuters had forecast orders for durable goods such as refrigerators and cars to creep up by 0.1 percent last month after a revised 1 percent drop in April, previously reported as a 0.6 percent decline, as weak U.S. growth chilled factory activity.
Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, fell 0.8 percent in May, the Commerce Department said.
This was somewhat less than analyst forecasts for a 1.4 percent drop and followed a 3.1 percent rise in April, revised down from a previously reported 4 percent gain.
The U.S. economy has been hit by weakness in the housing market which has hurt confidence and employment, but manufacturers have found some support from exports.
"The details of the report suggest that there is some underlying strength in areas like computers, electronics and electrical equipment," said Gary Thayer, senior economist at Wachovia Securities in St. Louis.
"That's an indication that outside of housing, other parts of the economy are doing better," he said.
Financial markets showed little reaction to the report, which was not far from expectations. Traders were focused on a meeting of Federal Reserve policy-makers, who were expected to hold interest rates steady but express increasingly discomfort on inflation in a statement due around 2:15 p.m.
Orders for computers and electronic products rose 2 percent while orders for electrical equipment were up 1.5 percent, the Commerce Department said.
But stripping out transportation, durable goods orders fell 0.9 percent in May, weaker than the 0.8 percent dip expected by analysts and compared with a 1.9 percent rise in April.
Overall shipments of durable goods shrank 1.1 percent after rising 1.8 percent in April.
"Shipments were down and that tends to be bad news for second quarter GDP (gross domestic product). Most of the problems are in transportation because no one is buying cars," said David Wyss, chief economist at Standard & Poor's Ratings Services in New York.
Orders for motor vehicle and parts fell 3.3 percent.
New orders excluding defense were 0.6 percent lower versus forecasts for a 0.5 percent decline and after a 0.8 percent drop in April. Defense aircraft orders soared 14.9 percent, the largest rise since December.
A separate report showed U.S. mortgage applications hit their lowest in nearly 6-1/2 years last week despite a sharp drop in interest rates.
The Mortgage Bankers Association said its index of mortgage applications dropped 9.3 percent last week.
The report was the latest sign to suggest the housing market had yet to reach bottom. Demand for loans to purchase a home fell 7.4 percent and refinancing applications plunged 12.1 percent.