Sales of new U.S. homes tumbled at the sharpest rate in more than a decade in November, the government said on Thursday, but a separate report showed consumers’ mood still buoyant as a close to 2004 neared.
A slew of reports, issued ahead of a Friday holiday that will see government offices and U.S. financial markets closed for Christmas, painted a somewhat muddled picture of steady but unspectacular expansion.
Sales of new homes plunged 12 percent last month, the biggest drop since a 23.8 percent fall in January 1994, to a seasonally adjusted annual rate of 1.125 million units. But industry analysts played its significance down, saying applications for new mortgages still were at healthy levels.
“I would not view this report as the beginning of a significant downturn,” David Berson, chief economist for mortgage financing giant Fannie Mae in Washington.
A forward-looking report from the University of Michigan showed its final index reading of consumer confidence for December at 97.1, up from November’s final reading of 92.8 and December’s preliminary reading of 95.7.
“The sentiment gain is a good sign that consumer spending could remain a mainstay of economic growth,” said Patrick Fearon, an economist with A.G. Edwards and Sons Inc. in St. Louis, Mo. “It’s gratifying to see that improvement.”
Guarding their wallets
Other reports on Thursday indicated consumers kept a grip on their wallets in November, spending less heartily and saving slightly more. They also showed U.S. factories enjoyed a surprisingly strong business pickup last month.
Consumer spending edged up a slim 0.2 percent in November -- a fraction of October’s 0.8 percent jump -- as purchases of new cars dropped sharply. The figure is closely monitored since consumers fuel two-thirds of national economic activity.
The October spending figure was revised up from the department’s previous report showing a 0.7 percent rise. After adjusting for inflation, November’s personal spending was flat after a 0.4 percent gain in October.
Incomes were up 0.3 percent last month after a hefty 0.6 percent increase a month earlier. Income and spending were in line with Wall Street economists’ forecasts and may have been affected by disruptions stemming from damaging hurricanes that hit Southeastern states in late summer and fall.
“The income numbers have been distorted a little by the hurricanes and they are just now coming back to normal, “said economist Mark Vitner of Wachovia Securities in Charlotte, N.C.
“But we have seen stronger job growth and so we have got fairly decent wage and salary growth,” he added.
More claim jobless pay
A separate report from the Labor Department showed new claims for U.S. jobless benefits up a slightly higher-than-expected 17,000 last week to 333,000.
Bonds were down moderately in pre-holiday trading but stock prices were higher, extending a rally as the strong durable goods report implied that corporate profits should remain on an upward trend.
The personal income report showed the personal savings rate increased to a still slight 0.3 percent in November from a slim 0.1 percent in October.
U.S. factories picked up a healthy surge in orders last month, up a sharper-than-expected 1.6 percent, pointing to relatively healthy activity in the nation’s factory sector.
The increase was a bounce back from a revised 0.9 percent decline in October that was originally reported as a larger 1.1 percent drop. The November orders pickup was the strongest in four months since a 1.9 percent increase in July, handily outstripping Wall Street forecasts for a 0.6 percent gain.
The biggest gain in November orders was in transportation goods, up 8.2 percent following a slim 0.3 percent rise a month earlier. It was the strongest rise in transportation orders since an 11 percent surge last February.
Transportation accounts for more than a quarter of overall durable goods, so any pickup there has a significant impact on the total. Excluding transportation, durables orders were down 0.8 percent after a 1.3 percent October decrease.
Analysts said there was enough in the report to add to optimism about the industrial outlook.
“Even though the ... (ex-transportation) number fell, a lot of the details showed some nice gains, plus the revisions were positive as well,” commented Lara Rhame, a foreign exchange strategist with Credit Suisse First Boston in New York.
Analysts have been watching for indications that a weakening U.S. dollar, which makes American-made products cheaper in foreign markets, will bolster orders for manufactured items and there were signs that may be happening.
