The US housing market continues to show signs of moderation.
July existing home sales drop, supply up
Sales of existing U.S. homes dropped 2.6 percent in July as the pace of both condominium and single-family home purchases slowed across nearly the entire country, a trade group said on Tuesday.
Previously owned home sales fell to a seasonally adjusted 7.16 million unit annual rate last month from June's record, which was revised up to a 7.35 million unit pace, the National Association of Realtors said... Analysts had expected overall sales to decrease to a 7.25 million unit annual pace. "There seems to be some air coming out of some of these balloons," said David Lereah, the Realtors' chief economist.
Despite the decline, July's sales were the third highest on record, and some economists and real estate industry executives called the monthly dip good for a housing market that has been soaring for more than four years...
Importantly, July's data showed a pickup in supply, the Realtors' group said. The inventory of homes available for sale rose 2.6 percent to 2.751 million existing homes -- the highest level since May 1988 when inventory totaled 2.85 million. July's level equates to 4.6 months' supply at the current sales pace. Lereah noted, though, that supply was still lean by historical standards. This helped keep prices lofty, with the national median home price in July rising to $218,000, up 14.1 percent from a year ago, the report showed...
A separate report on Tuesday showed a sign of slowing consumer spending. U.S. chain store sales dropped 0.9 percent in the first three weeks of August compared with the same span in July, independent company Redbook Research said, as consumers postponed purchases and hurt back-to-school sales...
The outlook for the global economy for the second half of 2005 improved though, according to a quarterly survey by the International Chamber of Commerce and the German Ifo institute. AFP reports:
After five straight quarters of decline, the survey's confidence index stabilised in July... A global economic climate indicator came in at 97.5, the lowest level since February 2004 but higher than a long term average of 94 between 1990 and 2004...
A rebound was anticipated in North America in particular... Estimates for growth in Asia remained stable and continued to decline for Europe, though not for the 12-nation eurozone. Conditions were expected to deteriorate however in Sweden and Switzerland, and even more noticeably in Great Britain.
Forecasts for the semiconductor industry in the second half of the year support this optimistic view, as reported in the EE Times.
... [T]he worldwide IC-equipment book-to-bill ratio moved above parity and hit 1.03 in July, up from 0.99 in June, according to VLSI Research Inc... Bookings rose 3 percent to $4.3 million in July...
Worldwide fab manufacturing capacity utilization slightly improved in the second quarter of 2005, although overall silicon foundry rates remain anemic, according to the Semiconductor International Capacity Statistics (SICAS) group on Tuesday (August 23)...
Overall, the trends are positive, however. "Chip makers ran a lean ship in the first half of 2005, which left the industry well primed for the second half," according to VLSI Research. "Inventories are low, utilization is rising, and equipment orders are finally starting to pick up. The foundries and subcons are buying again."
Research firm Action Economics thinks the strong economic growth will translate to strong earnings growth, according to a BusinessWeek article:
Happy days aren't just here again. They may be hanging around awhile, predict economists from research outfit Action Economics. U.S. corporate profits posted powerful second-quarter gains, and solid third-quarter figures are expected as well. The profit boom in this cycle has been unusually large and has fueled a solid investment boom that's strong even relative to the previous expansion.
Continued strength in profits through yearend should keep the investment boom alive well into 2006. That bodes well for economic and financial-market performance in the coming months.
Yes, the economic outlook for the rest of 2005 looks sanguine. Financial markets need to focus increasingly on the outlook for 2006.
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