Latest Glimmer of Economic Hope: Rise in Factory Orders

In a glimmer of surprisingly upbeat economic data, manufacturing orders for goods like metals, machines and military equipment rose last month for the first time after six months of declines, the government reported on Wednesday.

The Commerce Department reported that orders for durable goods rose 3.4 percent in February following a downwardly revised 7.3 percent drop in January. Orders for machinery, transportation equipment and computers and electronics rose.

The monthly gain was better than economists’ expectations of a 2.5 percent decline, and represented the latest in a series of less-than-terrible reports that have offered a break from months of relentlessly bad economic news.

On Monday, an industry group reported that sales of previously owned homes rose 5 percent in February, and the government reported on Tuesday that its barometer of home prices rose in January after 10 months of declines. Earlier this month, the government reported that consumer prices were stabilizing slightly, cooling fears of deflation and that retail sales in February had fallen by less than expectations.

The recent spate of “bad but not terrible” economic reports — along with more optimistic profit outlooks from the country’s biggest banks — has kindled hopes in some investors that the economy may be searching for a bottom. And although the recession is still spreading, hopeful investors have lifted stock markets some 20 percent over the last two weeks.

“You don’t want to make a trend out of any one month,” said Adam York, an economist at Wachovia Economics. “But we’ll take the good news where we can get it, and here and there we’re seeing some smatterings of less-bad economic data.”

But details of the data on durable goods gave economists some pause, and Mr. York said the positive headline number was basically a head fake.

The bounce in durable-goods orders followed large downward revisions to January data, and that orders were rebounding from extremely depressed levels. And even with the 3.4 percent gain in February, orders for durable goods were down 28.4 percent from a year earlier, the government said.

And economists said that forward-looking indexes of manufacturing activity are still bracing for months more declines as businesses cut jobs and capital spending in an effort to survive the broad global downturn.

“The underlying state of industry is still deteriorating,” Ian Shepherdson, chief United States economist at High Frequency Economics, said in a note.

Excluding the military, new orders increased 1.7 percent last month.

Still, some economists say that depressed industrial activity will probably pick up later this year and into 2010 as projects from the government’s $787 billion stimulus package hit the ground.

“The February report on durable goods demand is the latest in a recent series of data releases which suggest that the recession-battered U.S. economy may be close to, or at, a business cycle bottom,” Cliff Waldman, economist for the Manufacturers Alliance, wrote in a note.

In another report, the government said that new single-family home sales rose 4.7 percent in February, but that it was still the second-worst month on record, and was down more than 40 percent from February a year ago. The median price of a new home fell to $200,900, down from a peak of $262,600 in March 2006.

Home builders have cut back significantly on new residential developments as they struggle with lower demand for housing, tighter credit and a flood of cheap foreclosure properties.