biz.yahoo.com/ap/070824/economy.html?.v=19
AP New-Home Sales Rise, Factory Orders Up Friday August 24, 2:22 pm ET By Jeannine Aversa, AP Economics Writer Improvements in New-Home Sales and Factory Orders Mark Encouraging Signs for US Economy WASHINGTON (AP) -- Sales of new homes perked up, while factory orders took off in July, raising hopes that the economy can safely weather financial turmoil that has shaken Wall Street. The Commerce Department reported Friday that new-home sales rose 28 percent in July, after falling 4 percent in June. The increase in July lifted sales to a seasonally adjusted annual rate of 870,000 units. A second report showed that orders to factories for big-ticket goods jumped 59 percent in July, the most in 10 months.
They were forecasting home sales to fall and were calling for a much smaller, 1 percent gain in factory orders. The housing report showing sales up in July comes as credit standards have been tightening on home mortgages. Credit problems took a turn for the worse in August, making it even harder for some would-be buyers to get financing. That means home sales in the coming months will likely show renewed weakness, economists said. This was certainly a positive number," said Bernard Markstein, senior economist at the National Association of Home Builders. "If we could wipe out the events of the last several weeks, we would be rejoicing." The median price of a new home, meanwhile, was $239,500 in July, up from $238,100 in July a year ago. The median price means half sell for more and half sell for less. The average home price, however, dropped to $300,800 in July, down from $311,300 for the same month last year. On Wall Street, the Dow Jones industrials were up around 25 points in early trading. Friday's reports offered a spot of relief amid recent turbulence on Wall Street, which has darkened investors' feelings about the nation's financial prospects. Fears that the worsening housing slump and credit crunch could hurt the economy have gripped Wall Street investors in recent weeks, causing stocks to swing wildly. "The downside risks to growth have increased appreciably," Fed Chairman Ben Bernanke and his colleagues concluded on Aug. It was a much more sober assessment than they had offered just 10 days earlier when they met to examine economic conditions and interest rates. Against this backdrop, the central bank sliced the rate it charges banks for loans, a narrowly tailored move aimed at propping up sagging financial markets. If problems persist, the Fed could opt for more aggressive action: reducing an important interest rate, called the federal funds rate, on or before Sept. It is the Fed's main tool for influencing overall economic activity. The funds rate, the interest banks charge each other on overnight loans, has stayed at 525 percent for more than a year. A cut to the funds rate would bring lower interest rates for millions of people and businesses. In the manufacturing report, the 59 percent increases in new orders for "durable" goods followed a 19 percent rise in June. Durable goods are costly manufactured items expected to last at least three years. Orders went up for machinery, automobiles, metal products, airplanes and communications equipment. That blunted a drop in demand for computers, as well as electrical equipment and appliances. The pickup in demand for manufactured goods comes against a backdrop of a growing global economy, which has produced a bigger appetite for some US exports. Orders for automobiles rose 98 percent in July, the most since January 2003. Demand for primary metals, including steel, increased 79 percent, the biggest rise since July 2004. Demand for computers, however, dropped 4 percent in July and orders for electrical equipment and appliances fell 12 percent -- two weak spots in an otherwise strong report. Overall, the figures suggest that capital spending by businesses is weathering the financial storm so far. Credit problems, however, worsened in August, so upcoming reports on manufacturing and housing will offer more insight into companies' spending as well as the state of the housing market. Spending by businesses and consumers is a key ingredient to the country's overall economic health.
An unidentified worker toils on a new home being built in a subdivision in east Denver on Thursday, Aug. The increase in July lifted sales to a seasonally adjusted annual rate of 870,000 units.
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