Sales of new U.S. homes unexpectedly rose in August but sales in July were weaker than first thought, while new orders for durable goods fell, according to government reports on Wednesday giving mixed indications about the economy's direction.
New single-family home sales increased 4.1 percent in August to an annual rate of 1.050 million from the downwardly revised July rate of 1.009 million, the Commerce Department said.
The key thing is don't make too much out of the 4.1 percent increase in home sales in August, said Patrick Fearon, senior economist at A.G. Edwards & Sons Inc. in St. Louis.
If you take into account the downward revisions in each of the previous three months, the story is that the housing market is still on a downward trend. The mortgage applications data that came out today also confirm that, Fearon said.
In a sign of future weakness for U.S. manufacturers, orders for U.S.-made durable goods, items meant to last three years or more, fell 0.5 percent in August, marking the second monthly decline in a row and defying analyst expectations for a 0.5 percent increase. The Commerce Department also revised July drop to a steeper 2.7 percent from a previously reported 2.5 percent fall.
The home sales report and durable goods orders report are extremely volatile, and are often revised significantly. July home sales were originally report at a rate 1.072 million.
The new July home sales rate was the lowest since a March 2003 rate of 999,000. The Commerce Department also revised down new home sales rates for May and June.
Analysts polled by Reuters were expecting August new home sales to ease to a 1.04 million unit rate. The August rate of new home sales was down 17.4 percent from the 1.271 million annualized rate the same month last year.
U.S. mortgage applications fell last week for the first time in four weeks even as interest rates dropped to a six-month low, the Mortgage Bankers Association said in a separate report on Wednesday, providing further evidence that the U.S. housing market slump is deepening.
The supply of new homes available for sale in August at the current sales pace fell to 6.6 months' worth from 7.0 months in July. There were 568,000 homes available for sale at the end of August, down 0.4 percent from the 570,000 available at the end of July, according to the Commerce Department report.
U.S. Treasury debt prices pared gains after the stronger-than-expected August home sales. Stocks also rose, putting the Dow Jones industrial average close to its record high. The dollar pared losses after the homes data.
AUTOMOTIVE ORDERS RISE
Excluding transportation, durable goods orders fell 2 percent. Analysts were expecting a 0.5 percent rise in this category. Transportation orders rose 3.7 percent as a rise in auto and parts orders offset a decline in demand for civilian aircraft and parts.
There is more weakness creeping into the economy than expected, said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania.
When defense orders were stripped out, orders fell 0.8 percent. Analysts were expecting a 0.9 percent rise.
A proxy for business spending also posted a surprising drop, as nondefense capital goods orders excluding aircraft slipped 0.3 percent. Analysts were expecting a 0.5 percent gain in that category.
While often volatile, the durable goods data followed a report last week from the Philadelphia Federal Reserve Bank that showed factory activity in the mid-Atlantic region slipping in September, raising concerns over slowing growth.
If the economy is going to remain strong, we have to get some stimulation from an area other than the consumer, said Michael Metz, chief investment strategist at Oppenheimer & Co. in New York.
(Additional reporting by Julie Haviv and Ellen Freilich in New York and Mark Felsenthal in Washington)