U.S. Durable Goods Probably Fell as Spending Slowed

May 28 (Bloomberg) -- Orders for U.S. durable goods probably fell last month as companies trimmed investment plans and consumers bought fewer cars and televisions, economists said before a report today.

Bookings for goods meant to last several years fell 1.5 percent, according to a Bloomberg survey of 72 economists before the Commerce Department report. Orders excluding transportation equipment, which tend to be volatile, fell 0.5 percent, the economists said.

Businesses are reacting to slower sales and record fuel prices by scaling back on hiring and spending. A slowdown in purchases of equipment, combined with a worsening housing slump and weakening consumer spending on expensive items like autos, may bring an end to the six-year economic expansion.

``There is more weakness to come,'' said Lena Komileva, chief economist at Tullett Prebon Plc in London. ``Manufacturers remain under pressure from a recession in housing, high commodity costs and soft labor markets which are spreading housing weakness to the rest of the economy.''

Economists' forecasts ranged from a decline of 5 percent to a gain of 0.6 percent. The report from Commerce is due at 8:30 a.m. in Washington.

So far, manufacturing has done better than in past economic downturns. While the Institute for Supply Management's factory index fell to a five-year low of 48.3 in February and moved up to 48.6 in the following two months, it was still well above the 42.1 reading reached in February 2001, a month before the start of the 2001 recession. A figure of 50 is the dividing line between growth and contraction.

Auto Cutbacks

In addition to weakness in housing-related industries, automakers have led the factory downturn as consumers retrench.

Ford Motor Co., the second-largest U.S. carmaker, last week said its U.S. sales fell 9.8 percent this year through April as gasoline prices approached $4 a gallon. Ford said it would pare North American production 15 percent from a year earlier this quarter, and would cut third-quarter output as much as 20 percent.

``There is no doubt the slowing economy here in the United States presents a challenge for us,'' Chief Executive Officer Alan Mulally said at the company's annual shareholders meeting earlier this month. ``We are taking further cost-reduction actions.''

Increases in fuel costs are among the biggest concerns. Oil rose to more than $135 a barrel last week, the highest ever.

Companies that export have fared better, continuing to grow during the slowdown. A shrinking trade gap added 0.2 percentage point to first-quarter economic growth, according to Commerce Department figures.

Still, Federal Reserve officials, in minutes of their April 30 policy meeting released last week, lowered their 2008 economic growth projection by about a full percentage point to 0.3 percent to 1.2 percent.

``The outlook for business spending remained decidedly downbeat,'' the minutes said.