* Durable goods orders rise 1.1 percent in May
* Gauge of business spending plans rises 1.6 percent
* Report still shows underlying softness in manufacturing
* Pending home sales surge 5.9 percent in May
By Lucia Mutikani
WASHINGTON, June 27 Demand for long-lasting U.S.
manufactured goods rebounded more than expected in May and a
gauge of planned business spending increased, but a cooling
global economy suggests the momentum might not be sustained.
Durable goods orders rose 1.1 percent last month on strong
demand for transportation equipment, the Commerce Department
said on Wednesday. Economists had expected orders to rise just
Still, the report showed underlying softness and analysts
said the outlook does not look much better.
"With global and domestic demand continuing to weaken, we
believe that this relatively brisk pace of new orders activity
is unlikely to be sustained," said Millan Mulraine, senior macro
strategist at TD Securities in New York.
A slowdown in China and a looming recession in the euro zone
have taken some of the shine off the U.S. manufacturing sector,
leaving the economy stuck in a soft patch.
Excluding t ransportation and defense, durable goods orders
were down in May.
However, a budding recovery in the housing market should
provide a buffer for the economy. The National Association of
Realtors said signed contracts for home purchases increased 5.9
percent in May, t he most since October.
Investors took some encouragement from the housing data and
bought U.S. stocks. Lingering pessimism over Europe lifted the
dollar against the euro for a third straight day, but U.S.
Treasury debt prices were little changed after an auction of
five-year notes was met with tepid demand.
Demand for durable goods - items from toasters to aircraft
that are meant to last at least three years - tends to be
volatile. But a rolling three-month average showed a softening
trend and orders in May remained below their December level.
Last month, however, represented a relative bright spot.
Non-defense capital goods orders excluding aircraft, a
closely watched proxy for business spending plans, increased 1.6
percent in May after dropping 1.4 percent in April. The gain
snapped two straight months of declines.
Shipments of non-defense capital goods orders excluding
aircraft, used to calculate equipment and software spending for
the government's measure of gross domestic pr oduct, ro se 0.4
percent in May after declining 1.5 percent in April.
Regional surveys of factory activity have suggested a
weakening in orders this month, a trend that is likely to be
highlighted in a report on national manufacturing next week. An
early manufacturing gauge last week showed activity in June at
its slowest pace in 11 months.
"The underlying trends in orders and shipments of investment
goods not only remain weak but point to further deceleration
from the already subdued levels," said Harm Bandholz, chief
economist at UniCredit Research in New York.
Economists said businesses appeared reluctant to invest,
given an uncertain global economic outlook. Europe is struggling
with a debt crisis and the United States faces the prospect of a
sharp budgetary tightening at the start of next year.
While the U.S. economy is slowing, the housing market is
proving to be a bright spot.
The rise in pending home sales in May took them back to a
level that matched March as the highest since April 2010, when
buyers were rushing to take advantage of an expiring tax credit.
Other data this week showed new home sales at a two-year
high in May and house prices rising in April for a third
The improving tone was captured in homebuilder Lennar Corp's
quarterly orders, which soared 40 percent. America's
third-largest homebuilder was also able to demand higher prices.