rus april durable goods orders fall home sales up US April...

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