Associated Press Recession may be near bottom, new data suggest

Manufacturing data show recession near bottom; drop in new home sales signals slow recovery

WASHINGTON (AP) -- New signals the recession could be nearing a bottom emerged Wednesday in figures showing that orders to U.S. factories surged last month for everything from computers to aircraft and that a gauge of business investment rose by the most in nearly five years.

Still, an unexpected drop in new-home sales in May made clear that any rebound in the housing market, and the broader economy, likely will be long and slow.

Economists said the two reports showed an economy no longer in free-fall but still unable to mount a sustained recovery from the longest recession since World War II.

Hours after the Commerce Department figures were released, policymakers at the Federal Reserve decided to leave a key interest rate unchanged at a record low between zero and 0.25 percent, where it has been since December. Wrapping up a two-day meeting, the central bank repeated a pledge to leave rates low "for an extended period" to give the weak economy time to heal.

Though energy and other commodity prices have risen recently, the Fed said inflation will remain "subdued for some time." But Fed policymakers offered no new assurances that they would step up their purchases of government bonds and mortgage securities to try to drive down rates on consumer debt. That rattled bond investors who fear the prospect of higher interest rates. So did the Fed's observation that commodity prices are rising.

The mention of higher prices hit the Treasury market because the value of returns on fixed-income investments can erode quickly if inflation occurs. Stocks also fell after the Fed's announcement. The Dow Jones industrial average closed down 23 points at 8,299.86. Broader stock averages ended the day higher, though.

The 1.8 percent increase in durable goods orders in May was far better than the 0.6 percent decline that economists expected. It matched the rise in April, with both months posting the best performance since December 2007, when the recession began. more...