July Reports Give Mixed Picture of U.S. Economy

Two government reports painted a mixed U.S. economic picture Wednesday, as sales of new homes unexpectedly rose to another record but orders for durable goods fell more than expected in July.

New single-family home sales rose 6.5% from the previous month to a seasonally adjusted annual rate of 1.41 million units. The July sales pace was 27.7% higher than a year earlier. Economists had expected a 1.333-million-unit pace for July new-home sales.

A separate report showed that new orders for U.S. durable goods, which are products made to last three or more years, tumbled by a larger-than-expected 4.9% in July, the biggest drop in more than 1 1/2 years.

Orders excluding volatile transportation equipment also slipped more than expected, declining 3.2%. Economists polled by Reuters were expecting a 1.2% drop in durable goods orders and a 0.6% slide in durables excluding transportation.

The durable goods report showed the first decrease in orders for big-ticket items in four months, and the first fall in three months for orders when transportation equipment is stripped out.

“It seems like this is a conspiracy by the gods to make us economists eat our words when we said manufacturing was back on its feet. It’s certainly a disappointing number,” said Patrick Fearon, senior economist at A.G. Edwards & Sons in St. Louis.

Orders fell in most sectors. Computers and electronic product orders slipped 5.9%, machinery orders dropped 6.2% and electrical equipment orders eased 2%.

Demand for transportation equipment tumbled 8.6%, despite a 1.5% rise in motor vehicle orders. Civilian aircraft and parts orders fell 20.2%.

Non-defense capital goods orders excluding aircraft, viewed as a proxy for business spending, slipped 3.7%, the largest drop since October 2004.

“It could be this reflects the recent rebound in energy prices that possibly made people a little more cautious again,” Fearon said.

Orders for defense-related capital goods dropped 16.6%. Excluding defense, durable goods orders were down 4.5%.

The housing report showed that while sales climbed, so did supply. The inventory of homes available for sale at the end of July stood at a record 460,000, up 1.8% from June and 15% higher than a year earlier, the report showed.

At the current sales pace, the supply of homes represented four months’ worth in July.

The median price of a new home dropped for the third consecutive month, down 7.2% to $203,800 from $219,500 in June and off 4% from the price a year earlier, the report said. The July sales price was the lowest since December 2003, when it hit $196,000.