Friday, 28 July 2006

US factory orders up but new homes sales down, Europe looks strong for now

The data on the US economy yesterday were mixed. Reuters reports that durable goods orders were strong in June:

While new orders for U.S.-made durable goods rose 3.1 percent, much more than expected, in June, it was boosted by demand for volatile defense and transportation orders, Commerce Department data showed.

Capital goods orders excluding aircraft and defense, a good barometer for business spending, rose only 0.4 percent, compared with Wall Street expectations for a 1.1 percent rise...

Durables goods orders excluding transportation rose a larger-than-expected 1.0 percent, the ninth gain in the last 11 months.

And the labour market is tight:

In a sign of tight labor markets, workers filing new claims for state jobless benefits fell to the lowest level in six weeks, a Labor Department report said.

New applications for state jobless benefits fell to a seasonally adjusted 298,000 last week, from 305,000 claims in the previous week. Economists polled by Reuters were expecting a rise in claims.

But the housing market continues to weaken:

In another Commerce Department report, new single-family home sales fell a surprising 3 percent, the department said, to a seasonally adjusted annual rate of 1.131 million units. Analysts had expected a 1.160 million rate...

Along with the drop in new U.S. home sales, the median home price fell for the second month in a row to $231,300, but it was still above the $226,100 median price in June 2005.

In addition, the number of homes available at the current sales rate rose to a 6.1 months' supply, the highest since March. There were 566,000 new homes for sale at the end of the month, a record high.

But in the UK, the housing market appears to be pretty resilient. Again from Reuters:

The number of mortgage approvals for home purchases in Britain rose 22 percent in June from a year ago, suggesting house prices will keep rising, British Bankers' Association data showed on Thursday.

Reports like this are raising calls for interest rates hikes, most recently by the National Institute for Economic and Social Research, as Reuters reports.

The economy is picking up faster than expected and with inflation likely to remain above target for some years, the Bank of England should raise rates sooner rather than later, a think-tank said on Friday...

"There's little to be gained by delaying the rise until late in the year," NIESR Director Martin Weale, told a news conference. "Given that we have inflation staying above target and given rates are expected to rise I cannot see a strong case for waiting."

Meanwhile, unemployment fell in France in June. From AFX/Forbes:

France's seasonally-adjusted unemployment rate fell to 9.0 pct in June from 9.1 pct in May, the Labour Ministry said.

The number of registered unemployed who are 'immediately available' for work fell 26,500 to reach 2,186,000 on a seasonally-adjusted basis.

And consumer confidence has been quite good in Germany. From Bloomberg:

GfK's confidence index, based on a July survey of about 2,000 people that aims to forecast household spending one month ahead, climbed to 8.6 from a revised 8 in the previous month, the market-research company said in an e-mailed statement today. That was the highest level since November 2001.

But there is underlying ambivalence.

Gfk's sub-index measuring readiness to spend rose 3 points to 57.5, the highest level since the index started in 1980, and a gauge tracking households' income expectations rose 5 points to minus 3.8. A measure of consumers' assessment of the economy fell 5 points to 15.6.

"Evidently, consumers worry that the positive signs for the economy are going to be short-lived," GfK said in the statement.

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