Thursday, August 27, 2009

Cheerful US data buoy recovery hopes

       Sales of new US homes hit their highest level in 10 months in July and orders for long-lasting manufactured goods surged, offering fresh evidence a modest economic recovery was taking shape.
       The Commerce Department on Wednesday said sales of new single-family homes rose 9.6% from June to an annual pace of 433,000 units, the highest rate since September.
       It was the biggest gain since February 2005 and it reduced the supply of unsold homes on the market to its lowest level in more than 16 years, another sign that housing activity had stabilised after a three-year slump.
       A report showing mortgage applications rising for a second straight week,with demand for refinancing loans reading their highest level since early June,suggested home sales are still rising.
       "The recovery in the housing market is very much under way," said Michelle Meyer, an economist at Barclays Capital in New York.
       In a third report, the Commerce Department said a surge in demand for aircraft pushed orders for US-made durable goods up 4.9% last month, the largest advance in two years.
       "Big-ticket items are displaying very normal recovery patterns, signaling that the early phase of this recovery may be stronger than people are anticipating. It doesn't mean it will be sustained," said Stephen Gallagher, chief US economist at Societe Generale in New York.
       The data was the latest hinting that the US economy's worst slump in 70 years was over or close to it, though analysts cautioned that recovery will be hobbled by sluggish consumer demand,owing to high unemployment.
       Highlighting the tight squeeze on households, a survey showed Americans will cut their travel plans for the summerending Labour Day holiday dramatically this year to save money.
       While the housing sector appears to be recovering from a three-year slump,there are fears it could falter if a government tax credit of up to $8,000 for firsttime home buyers is not extended. The credit is due to expire at the end of November.
       The inventory of new homes available for sale fell 3.2% to 271,000 units in July,the lowest since March 1993.
       At July's sales pace, that would be a 7.5-month supply, the lowest since April 2007.
       Economists said the home sales data was clearly good news, but they noted the report on orders for durable goods,items meant to last at least three years,was mixed.
       Demand for transportation equipment jumped 18.4%, the biggest gain in three years, as civilian aircraft orders at Boeing jumped and the government's "cashfor-clunkers" programme, which gave buyers discounts to trade-in old gas guzzlers for new fuel-efficient cars, lifted auto demand.
       Still, new orders excluding transportation climbed 0.8% in July for the first successive three-month advance since the first quarter of 2006. Even more encouraging, shipments of durable goods increased 2%.
       But non- defence capital goods orders excluding aircraft - a closely watched proxy for business spending - slipped 0.3% in July after rising 3.6% the previous month.

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