Manufactured goods rebound after April slump

WASHINGTON (AP) Orders to U.S. factories for costly manufactured goods rebounded last month from a sharp drop in April as demand for cars and semiconductors registered especially strong increases.

The Commerce Department reported Tuesday that orders for durable goods jumped by 2.9 percent last month, a much stronger performance than the 0.4 percent rise many analysts were predicting.

May's increase followed a steep 5.5 percent decline in April and was the best showing since February.

The report, which showed an increased appetite for many big-ticket goods, provided a bright spot for manufacturers. That sector has been hit hardest by the economic slowdown that has gripped the country since the second half of last year.

On Wall Street, stock prices headed down again. After the first half-hour of trading, the Dow Jones industrial average was off 50 points and the Nasdaq index was down 11 points.

One part of the economy that has held up well during the slowdown is housing, bolstered in large part by low mortgage rates.

New-home sales rose a solid 0.8 percent in May to a seasonally adjusted annual rate of 928,000, following a revised 4.5 percent decline the month before, a much smaller drop than previously reported, the department said.

New-home sales last month increased by 5.7 percent in the Midwest, by 4 percent in the West and 0.2 percent in the South. They fell by 19.7 percent in the Northeast.

To stave off recession, the Federal Reserve has slashed interest rates five times this year, driving down borrowing costs to their lowest point in seven years.

Many economists believe the Fed will cut rates for a sixth time on Wednesday. They are divided over whether it will be by another half-point or a quarter-point.

To cope with the economic slowdown, manufacturers have sharply cut back production and laid off thousands of workers. Other recent reports on factory activity have suggested manufacturing, which many believe is in a recession of its own, is struggling with slumping demand. A report by the Fed showed that industrial activity plunged in May for the eighth month in a row, stifling hopes that the industry's darkest days had passed.

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