New orders for long-lasting US manufactured goods rose by a much stronger-than-expected 1.8 per cent in May, Commerce Department data on Wednesday showed. May's increase, the third gain in 4 months, followed a revised 1.8 per cent gain in April.

Manufacturing, which accounts for about one-third of the economy, provides a good barometer for overall business health, and the May durable goods orders report showed solid gains.

New orders excluding transportation advanced 1.1 per cent last month, compared with a forecast for a 0.4 per cent decline, buoyed in part by a 7.7 per cent rise in new machinery orders. This was the largest percentage increase in that category since March 2008, the Commerce Department said.

More importantly, non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending, jumped 4.8 per cent in May, the largest gain since September 2004. May's sharp rise compared with forecasts for a 0.6 per cent drop and after a revised 2.9 per cent April fall.

'The numbers point to a stabilisation, but certainly not a robust recovery,' said Keith Hembre, chief economist at First American Funds in Minneapolis.

HOUSING
A still-weak economy was also illustrated by a new single-family home report released later by the Commerce Department, which showed sales slipping 0.6 per cent last month to a 342,000 annual pace.

'The overall level of sales is still very soft. Buyers may still be reluctant to step up with prices still edging downward. We're stabilizing, but we still have some hurdles to overcome before we see a solid recovery in housing,' said Gary Thayer, senior economist at Wells Fargo Advisors.

The median sales price rose to US$221,600 (S$332,400) from US$212,600 in April and was the highest since December, when it was $229,600. The median marks the half-way point, with half of all houses sold above that level and half below.

Economists believe the US housing market will not begin to recover until home prices fall far enough to stimulate demand that will whittle down the overhang of unsold homes. -- REUTERS