rus april durable goods orders fall home sales up
US April durable goods orders fall,home sales up AAP News 6:37:020 25/05/2006 By Mark Felsenthal WASHINGTON, May 24 Reuters - New orders for US-made durable goods tumbled an unexpectedly large 4.8 percent in April but new home sales were surprisingly strong last month, government reports showed on Wednesday. The reports' conflicting signals on the economy added to investor concerns about higher inflation and slower economic growth. "The housing market is an important variable for the Fed. Given the strength of the data, the sector is fairly strong," said George Davis, chief foreign exchange technical analyst for RBC Capital Markets in Toronto. U.S. interest rate futures showed investors rating chances the Federal Reserve will boost interest rates in June at 56 percent, up from about 50 percent before the housing data. Orders for durable items, those meant to last three years or longer, fell the most since January on big declines in civilian aircraft and computer and electronic products orders. Even with transportation stripped out, orders for durable goods were down 1.1 percent. The housing report showed the U.S. housing market defying predictions of a slowdown in April as new home sales rose 4.9 percent while prices climbed, although the supply of homes for sale hit a record. U.S. Treasury debt prices initially rose on the drop in durables orders, which traders took -- along with a separate report of lower demand for home loans -- as a sign of a softening economy. But bond prices then slipped after the stronger-than-expected housing numbers, which were seen as evidence of strength and a possible reason for the Federal Reserve to raise rates again next month. The dollar rose against the euro and the yen, while Wall Street stocks were slightly higher at midday after a mixed performance earlier in the session. VOLATILE DURABLES The drop in durable goods orders surprised analysts. A Reuters poll had forecast a 0.5 percent drop in durable goods orders on weaker aircraft buying, but anticipated a 0.5 percent gain excluding transportation. Still, the durable goods data is notoriously volatile and April's overall drop followed an upwardly revised 6.6 percent surge in March. In a potentially positive sign for future production, unfilled orders for durable goods rose $9.3 billion, or 1.5 percent, to the highest level since the data have been gathered in current form beginning in 1992. Unfilled orders have climbed in 11 of the last 12 months. Non-defense capital goods orders excluding aircraft, viewed as a proxy for business spending, dropped a larger-than-expected 1.7 percent. Economists polled by Reuters had forecast a 0.8 percent decline in this number. Transportation equipment orders fell 12.7 percent, the biggest drop since January. Civilian aircraft and parts orders, which fluctuate widely month-to-month, slid 32.2 percent after a 67.7 percent gain in March. Computers and electronic products orders plunged 10.4 percent, the largest decline since July 2000. Communications equipment orders plummeted by 27.4 percent, the heftiest drop since November 2004. HOUSING STILL BUBBLING The pace of new home sales rose to a seasonally adjusted 1.198 million unit annual rate from a downwardly revised 1.142 million unit pace in March, the Commerce Department said. Analysts polled by Reuters were expecting new home sales to slow in April to a 1.15 million unit pace from an originally reported 1.213 million unit rate in March. However, the April pace was down 5.7 percent from the year-ago rate. In a further sign the long-anticipated cooling in the housing market has not yet taken hold, April's median home price rose 2.8 percent from March to $238,500. "The Fed's expectation is that the housing market is cooling and that the spillover into the whole economy is not going to be large, and this data is meeting that expectation for now," said Stephen Gallagher, U.S. chief economist at Societe Generale in New York. A separate report from the Mortgage Bankers Association showed that U.S. mortgage applications fell last week, driven by a steep decline in home buying loans despite a dip in long-term interest rates. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.61 percent, down 0.05 of a percentage point from the prior week, which was its highest level in nearly four years. Reuters
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