Sales of new homes in the US ticked up last month as buyers took advantage of low prices and new financing incentives.
Separately on Thursday, the Department of Labor revealed that new jobless claims eased last week while continuing benefits claims broke a new record, and Commerce Department figures showed that companies have increased their spending on orders of durable goods in a return to capital investment.
New home sales rose by 0.3 per cent in April, trailing economists’ forecasts, after falling by a revised 3 per cent in March. The rise was due to a growing number of sales in the south, but was blunted by a 3.8 per cent slide in the west.
In spite of the small monthly increase, the pace of new home sales is 34 per cent below the same month a year ago and is off by 74 per cent from its peak in July 2005.
The median price of a new home rose by 3.7 to $209,700 last month, but is 14.9 per cent lower than in April 2008. Earlier this week the S&P/Case-Shiller index showed that home prices in 20 American cities have fallen by 18.7 per cent annually.
Although the inventory of homes for sale remains high, the number of new homes on the market fell in April to 297,000 from 310,000 in March. That represents a 10.1-month supply at the current sales pace, down from 10.6 the prior month. Joshua Shapiro, chief US economist at MFR, notes that a 6-month supply is “normal”.
Meanwhile, the number of US workers claiming unemployment benefits declined in the week ending May 23, offering hope that the worst of the job cuts that savaged the labour force may be abating. New jobless claims dropped by 13,000 to 623,000. It was the second consecutive week during which fresh claims fell back and the four-week average declined by 3,000 to 626,750.
However, the number of Americans continuing to claim jobless benefits rose to another record high during the week to May 16. Continuing jobless claims rose to 6.79m from a revised 6.68m, marking the 17th consecutive week that a new record was reached.
Although the figures beat forecasts, economists are concerned that a raft of job cuts related to the restructuring of US carmakers will put more pressure on the fragile employment situation.
The US unemployment rate stands at 8.9 per cent, its highest level in a quarter of a century, and the Federal Reserve predicts that it will reach 9.5 per cent by the end of 2010 before retreating. Paul Ashworth, senior US economist at Capital Economics, suggests that the new jobless figure needs to fall below the 400,000-level before payrolls begin to expand.
“We think claims will drift lower for the foreseeable future but we don’t see hiring picking up anytime soon.” said Ian Sheperdson, chief US economist at High Frequency Economics. “Companies are less scared now about the potential implosion of the financial system but they are worried about the sustained weakness in demand.”
In spite of those fears, businesses are showing some renewed interest in spending. The Department of Commerce said that US durable goods orders jumped by 1.9 per cent to $161.5bn in April from the month before, rebounding from a revised drop of 2.1 per cent in March. Although the results were far better than economists expected, the sharp downward revision for the previous month stole some of the lustre.
Excluding volatile orders for transportation goods, new orders rose by 0.8 per cent. They were up by 1 per cent when factoring out defence orders, which were up by 23.2 per cent, after falling in March.
The manufacturing sector has been suffering from weakness at home and slowing growth abroad. Over the year new orders are off by 27.3 per cent, however they have increased at an annual rate of 5.8 per cent during the last three months. In April, companies spent more on general machinery, metals and communication equipment.
“Manufacturing activity is stabilising as inventory liquidation pressures ease,” noted John Ryding and Conrad DeQuadros, economists at RDQ Economics.