ICS Magazine

U.S. New Home Sales Up, Durables Down

June 24, 2004
WASHINGTON (Reuters) - Buyers rushing to beat rising U.S. mortgage rates pushed new home sales up by nearly 15 percent to a record in May, while businesses saw weaker demand for long-lasting durable goods, government reports showed on Thursday.

The Commerce Department said sales of new homes surged a whopping 14.8 percent -- their biggest monthly gain since April 1993 -- to a record annual rate of 1.369 million units.

A separate report from the Commerce Department showed orders for durable goods, which are items meant to last three years or more, posted an unexpected drop in May, falling 1.6 percent after a 2.6 percent slide in April.

This was the first time since November-December 2002 there were back-to-back decreases in orders.

Meanwhile, the Labor Department said the number of Americans seeking jobless benefits rose more than expected last week. However, the number was elevated by claims from those who were unable to file when government offices were closed during the June 11 funeral for former President Ronald Reagan.

The private sector Conference Board had better news on the job front, saying its index of U.S. help-wanted advertising improved to 39 in May from 38 in April.

Economists said the reports taken together showed the U.S. economy was still continuing its rebound from the 2001 recession but was showing signs, after three quarters of sizzling growth, of cooling down to a more sustainable pace.

"Some kind of reasonable cool-down could be welcome," said Anthony Karydakis, senior financial economist with BancOne Capital Markets in Chicago.

A solid but not overheated growth rate would comfort Federal Reserve officials, who are set to meet next Tuesday and Wednesday amid widespread expectations they will raise short-term interest rates in an attempt to head off inflation.