Jones Lang LaSalle
New Signs of a Slowing Economy in 2 Federal Reports
By JEREMY W. PETERS
New-home sales rose last month, but failed to keep up the robust growth pace of March. The home sales numbers, along with a second government report yesterday that showed a steep decline in orders for durable goods, were seen as pointing to a softening economy.
But the numbers did little to reassure investors hoping that the economic data would encourage the Federal Reserve not to raise interest rates when it meets next month.
The Commerce Department reported yesterday that sales of new homes were up 4.9 percent in April, while orders for durable goods — relatively costly items that are expected to last at least three years, including aircraft and home appliances — fell 4.8 percent.
Since the Fed increased its benchmark short-term interest rate earlier this month to 5 percent, investors have been scrutinizing every economic indicator to determine what it might do at its next meeting in late June. With consumer prices on the rise and fears of inflation growing, many investors worry the Fed may raise rates for the 17th consecutive time in two years.
Investors' attention will now turn to the Commerce Department's announcement today of the revised gross domestic product figure for the first quarter, which is expected to be above the already strong 4.8 percent reported in February.
Because growth was so torrid in the first quarter, most economists expect the economy to slow as the year goes on. But it is unclear whether that will be enough to encourage central bankers that they do not need to worry about inflation.
"We came ripping right out of the box in January," said Brian Jones, an economist with Citigroup. "Going forward it would be very difficult to keep that pace of spending up."
Indeed, investors appeared unsure how to digest yesterday's economic news. After a day in which the major United States stock indexes swung in and out of the red, stocks ended on an up note. The Dow Jones industrial average gained 18.97 points, to close at 11,117.32. The Standard & Poor's 500-stock index climbed 1.99 points, to 1,258.57. The Nasdaq rose 10.41 points, to 2,169.17. [Page C12.]
Gold futures fell nearly 5.4 percent, or $36.20, to $637.50 an ounce.
Typically, new housing sales and durable goods are two highly volatile measures of economic growth. This year, they have been even more volatile than usual. New-home sales were down in the first two months of 2006 but up 12 percent in March.
Durable goods orders plunged in January but were up for the next two months.
Despite all the ups and downs in recent months, Wall Street analysts were still surprised by the numbers released yesterday.
"These are two of the most volatile series that we have," said Dean Maki, chief United States economist at Barclays Capital. "And they displayed volatility in the most recent data."
While much of the drop in the durable goods figure can be attributed to fewer orders for aircraft last month, the home sales numbers are more of a reason for concern. The new housing data appear to confirm what many economists have already said: as real estate speculators bow out of a peaking market and mortgage rates rise, the torrid pace of home sales is cooling. Compared with last April, sales of new homes fell 5.7 percent.
"It does look like things seem to be steadying," said Stephen Stanley, chief economist with RBS Greenwich Capital. "Now, we're more or less just back to the fundamental demand that was there all along of people who actually want to buy and live in a home — the family with two kids and a dog."
Inventories are also rising, yet another sign of weakness in the latest housing data. At the end of April, the number of homes for sale reached a record 565,000.
The median sale price of new homes nationwide rose to $238,500 in April, up from $232,000 in March, but little changed from a year earlier.
Sales of new homes in April were at a seasonally adjusted annual rate of 1.2 million compared with the annual rate for March of 1.1 million homes. The largest gains last month were in the Northeast and the South, which both had increases of about 8 percent.
With mortgage rates climbing, many economists believe home sales will decline this month.
"We did get this quirky increase in April," said Mr. Jones of Citigroup. "But what we will see probably is a nice, gradual, orderly decline in activity."
Copyright 2006 The New York Times Company
New Signs of a Slowing Economy in 2 Federal Reports
By JEREMY W. PETERS
New-home sales rose last month, but failed to keep up the robust growth pace of March. The home sales numbers, along with a second government report yesterday that showed a steep decline in orders for durable goods, were seen as pointing to a softening economy.
But the numbers did little to reassure investors hoping that the economic data would encourage the Federal Reserve not to raise interest rates when it meets next month.
The Commerce Department reported yesterday that sales of new homes were up 4.9 percent in April, while orders for durable goods — relatively costly items that are expected to last at least three years, including aircraft and home appliances — fell 4.8 percent.
Since the Fed increased its benchmark short-term interest rate earlier this month to 5 percent, investors have been scrutinizing every economic indicator to determine what it might do at its next meeting in late June. With consumer prices on the rise and fears of inflation growing, many investors worry the Fed may raise rates for the 17th consecutive time in two years.
Investors' attention will now turn to the Commerce Department's announcement today of the revised gross domestic product figure for the first quarter, which is expected to be above the already strong 4.8 percent reported in February.
Because growth was so torrid in the first quarter, most economists expect the economy to slow as the year goes on. But it is unclear whether that will be enough to encourage central bankers that they do not need to worry about inflation.
"We came ripping right out of the box in January," said Brian Jones, an economist with Citigroup. "Going forward it would be very difficult to keep that pace of spending up."
Indeed, investors appeared unsure how to digest yesterday's economic news. After a day in which the major United States stock indexes swung in and out of the red, stocks ended on an up note. The Dow Jones industrial average gained 18.97 points, to close at 11,117.32. The Standard & Poor's 500-stock index climbed 1.99 points, to 1,258.57. The Nasdaq rose 10.41 points, to 2,169.17. [Page C12.]
Gold futures fell nearly 5.4 percent, or $36.20, to $637.50 an ounce.
Typically, new housing sales and durable goods are two highly volatile measures of economic growth. This year, they have been even more volatile than usual. New-home sales were down in the first two months of 2006 but up 12 percent in March.
Durable goods orders plunged in January but were up for the next two months.
Despite all the ups and downs in recent months, Wall Street analysts were still surprised by the numbers released yesterday.
"These are two of the most volatile series that we have," said Dean Maki, chief United States economist at Barclays Capital. "And they displayed volatility in the most recent data."
While much of the drop in the durable goods figure can be attributed to fewer orders for aircraft last month, the home sales numbers are more of a reason for concern. The new housing data appear to confirm what many economists have already said: as real estate speculators bow out of a peaking market and mortgage rates rise, the torrid pace of home sales is cooling. Compared with last April, sales of new homes fell 5.7 percent.
"It does look like things seem to be steadying," said Stephen Stanley, chief economist with RBS Greenwich Capital. "Now, we're more or less just back to the fundamental demand that was there all along of people who actually want to buy and live in a home — the family with two kids and a dog."
Inventories are also rising, yet another sign of weakness in the latest housing data. At the end of April, the number of homes for sale reached a record 565,000.
The median sale price of new homes nationwide rose to $238,500 in April, up from $232,000 in March, but little changed from a year earlier.
Sales of new homes in April were at a seasonally adjusted annual rate of 1.2 million compared with the annual rate for March of 1.1 million homes. The largest gains last month were in the Northeast and the South, which both had increases of about 8 percent.
With mortgage rates climbing, many economists believe home sales will decline this month.
"We did get this quirky increase in April," said Mr. Jones of Citigroup. "But what we will see probably is a nice, gradual, orderly decline in activity."
Copyright 2006 The New York Times Company
posted by Jones Lang LaSalle NJ News Blog at 3:16 PM
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