August 24, 2006

US July home sales, durable goods orders fall

By Mark Felsenthal

WASHINGTON (Reuters) - Sales of new U.S. homes and orders
for durable goods both fell more than expected in July,
providing further evidence of slowing U.S. economic growth.

U.S. stock prices slipped and Treasury debt prices gained
as markets saw the data as supporting the view that the Federal
Reserve will not raise interest rates next month.

"It suggests that the economy is cooling off," said Gary
Thayer, chief economist at A.G. Edwards and Sons in St. Louis.

"The Fed will stay on the sidelines," Thayer said.

In another sign that markets anticipate cooling in the
economy, yields for longer-dated Treasury securities were lower
than for shorter-term securities.

New homes sales fell 4.3 percent last month, the biggest
drop since an 11.5 percent plunge in February and the lowest
annualized rate since February as well, the Commerce Department

Sales of new U.S. homes slid to a seasonally adjusted 1.072
million annualized rate in July, and a key inventory measure
jumped to a 10-year high, the Commerce Department reported,
pointing to a rapidly cooling housing market.

Analysts polled by Reuters had expected sales to ease to a
1.100 million annual rate.

The supply of homes available for sale at the current sales
pace rose to 6.5 months, the highest level since a 6.8-month
supply in November 1995.

There were 568,000 new homes available for sale at the end
of the month, a record high, according to the report.

The median sales price of a new home slipped to $230,000,
but was still above the median $229,200 price in July 2005.

"On all fronts, be it the leading indicators, the housing,
or homebuilder sentiment, housing is on a pretty steep
decline," said Richard Franulovich, senior currency strategist
at Westpac in New York. "It vindicates the bears on the U.S.

Sales plummeted 8 percent in the South, the busiest sales
region, and by 21.3 percent in the Midwest. They rose by 11.7
percent in the West, the second busiest sales region of the
country, and by 1.8 percent in the Northeast.

New home sales are recorded on contract, usually before the
home is built, and can be seen as a gauge of future economic

Other government reports on Thursday showed overall new
orders for U.S.-made durable goods fell 2.4 percent last month,
much more than expected, as civilian aircraft and car orders

It was the first decline in orders for durable goods --
items built to last three years or longer -- in three months,
the Commerce Department said. Analysts polled by Reuters had
expected durable goods orders to fall 0.5 percent.

However, excluding transportation, durable goods orders
rose a stronger-than-expected 0.5 percent, as motor vehicle and
parts orders dropped 7 percent and civilian aircraft orders
slid 10 percent. Analysts had expected a 0.3 percent rise in
durable goods outside transportation.

When defense orders were stripped out, durable goods orders
unexpectedly fell 1.9 percent, as defense aircraft and parts
orders rose 9 percent. Analysts were expecting a 0.5 percent
rise in durable goods orders excluding defense.

A closely watched category that many see as a signal of
business spending, non-defense capital goods orders excluding
aircraft, rose a much larger-than-expected 1.5 percent.
Analysts had forecast a 0.4 percent rise in the category.

The orders report "is an indication that at least the
manufacturing sector is still doing reasonably well," said
Matthew Strauss, senior currency strategist for RBC Capital
Markets in Toronto.

A separate report showed the number of workers seeking
first-time jobless aid fell by 1,000 last week, signaling a
steady job market.

The Labor Department said the number of initial claims for
state jobless benefits declined to 313,000 last week from an
upwardly revised 314,000 in the prior week. The total was
slightly below the 315,000 claims that analysts had forecast in
a Reuters poll.

The Labor Department had initially reported the prior
week's total as 312,000 and a department analyst said there
were no special factors explaining the latest week's dip. New
claims have oscillated within a tight range of 297,000 to
322,000 since the beginning of June.

The four-week moving average, considered a more reliable
barometer of employment conditions because it irons out weekly
fluctuations, rose to 315,250 last week from a revised 311,750.

The number of workers remaining on state unemployment
benefits for the week ended August 12, the latest week for
which such figures were available, fell by 9,000 to 2.492
million, just below analysts' forecasts of 2.495 million.

(Additional reporting by David Lawder))