Data Offer Mixed View of Economy

Sales of new U.S. homes unexpectedly rose in August but sales in July were weaker than first thought, while new orders for durable goods fell, according to government reports Wednesday giving mixed indications about the economy’s direction.

Sales of new single-family homes increased 4.1% in August to an annual rate of 1.050 million from the downwardly revised July rate of 1.009 million, the Commerce Department said.

“If you take into account the downward revisions in each of the previous three months, the story is that the housing market is still on a downward trend,” said Patrick Fearon, senior economist at A.G. Edwards & Sons Inc. in St. Louis.

In a sign of future weakness for manufacturers, orders for U.S.-made durable goods, items meant to last three years or more, fell 0.5% in August, marking the second monthly decline in a row and defying analysts’ expectations for a 0.5% increase. The Commerce Department also revised the July drop to a steeper 2.7% from a previously reported 2.5% fall.

The reports on home sales and durable goods orders are extremely volatile and are often revised significantly. July home sales were originally reported at a rate of 1.07 million.

The new July home sales rate was the lowest since a March 2003 rate of 999,000. The Commerce Department also revised down new-home sales rates for May and June.

Analysts polled by Reuters were expecting August new-home sales to ease to an annual rate of 1.04 million units. The August rate of new-home sales was down 17.4% from the 1.27 million rate the same month last year.

U.S. mortgage applications fell last week for the first time in four weeks even as interest rates dropped to a six-month low, the Mortgage Bankers Assn. said in a separate report Wednesday, providing further evidence that the U.S. housing market slump is deepening.

The supply of new homes available for sale in August at the current sales pace fell to 6.6 months’ worth from seven months in July. There were 568,000 homes available for sale at the end of August, down 0.4% from the 570,000 available at the end of July, according to the Commerce Department report.

Excluding transportation, durable goods orders fell 2%. Analysts were expecting a 0.5% rise in this category. Transportation orders rose 3.7% as a rise in auto and parts orders offset a decline in demand for civilian aircraft and parts.

When defense orders were stripped out, orders fell 0.8%. Analysts were expecting a 0.9% rise.

A proxy for business spending also posted a surprising drop, as non-defense capital goods orders excluding aircraft slipped 0.3%. Analysts were expecting a 0.5% gain in that category.

Although often volatile, the durable goods data followed a report last week from the Philadelphia Federal Reserve Bank that showed factory activity in the mid-Atlantic region slipping in September, raising concerns over slowing growth.

“If the economy is going to remain strong, we have to get some stimulation from an area other than the consumer,” said Michael Metz, chief investment strategist at Oppenheimer & Co. in New York.