US new home sales tum­ble, ser­vices sec­tor weak­ens

The Pak Banker - - BUSINESS -

New U.S. sin­gle-fam­ily home sales tum­bled in Jan­uary from a 10month high as sales in the West re­gion plunged, but the over­all hous­ing mar­ket re­cov­ery re­mains in­tact.

Other data on Wed­nes­day showed the ser­vices sec­tor con­tracted in early Fe­bru­ary for the first time since Oc­to­ber 2013, sug­gest­ing a weak­en­ing of eco­nomic con­di­tions out­side the trou­bled man­u­fac­tur­ing and en­ergy in­dus­tries.

"The re­ports point to some weak­en­ing in un­der­ly­ing eco­nomic mo­men­tum. That said, we con­tinue to ex­pect the re­cov­ery to re­bound from the fourth-quar­ter stum­bles, though the out­look be­yond the first quar­ter re­mains very un­cer­tain," said Mil­lan Mul­raine, deputy chief econ­o­mist at TD Se­cu­ri­ties in New York.

The Com­merce Depart­ment said sin­gle-fam­ily home sales dropped 9.2 per­cent last month to a sea­son­ally ad­justed an­nual rate of 494,000 units, al­most un­wind­ing De­cem­ber's sharp in­crease. Econ­o­mists had fore­cast new home sales, which ac­count for 8.3 per­cent of the hous­ing mar­ket, slip­ping to only a 520,000 unit-rate last month. Sales in the West, which has seen a steep rise in home prices be­cause of tight in­ven­to­ries, plum­meted 32.1 per­cent to their low­est level since July 2014. The per­cent de­cline was the largest since May 2010.

Sales rose 3.4 per­cent in the North­east, de­spite a bliz­zard in late Jan­uary. They were also up 1.8 per­cent in the pop­u­lous South, but de­creased 5.9 per­cent in the Mid­west. The new home sales data tends to volatile month- to- month be­cause it is drawn from a small sam­ple. As such, econ­o­mists were not too wor­ried about Jan­uary's plunge. "Through some of the noise in the data, it ap­pears that home sales are con­tin­u­ing to trend higher over time off of his­tor­i­cally low lev­els. We main­tain our view that the hous­ing mar­ket will con­tinue to re­cover," said Daniel Sil­ver, an econ­o­mist at JPMor­gan in New York.

The PHLX hous­ing in­dex .HGX, in­clud­ing builders, build­ing prod­ucts and mort­gage com­pa­nies, rose 0.36 per­cent, out­per­form­ing a broadly weaker stock mar­ket. The dol­lar dipped against a bas­ket of cur­ren­cies, while prices for U.S. Trea­sury debt rose. Hous­ing re­mains sup­ported by a tight­en­ing la­bor mar­ket, which is lift­ing wage growth and bol­ster­ing house­hold for­ma­tion. Re­ports on Tues­day showed sales of pre­vi­ously owned homes hit­ting a six-month high in Jan­uary and house prices ris­ing 5.7 per­cent in the year to De­cem­ber. While mort­gage ap­pli­ca­tions fell last week, they re­tained half of the prior week's in­crease.

In a sep­a­rate re­port, data firm Markit said its flash U.S. ser­vices PMI busi­ness ac­tiv­ity in­dex fell to 49.8 early this month from a read­ing of 53.2 in Jan­uary. A read­ing below 50 in­di­cates a con­trac­tion in ser­vices sec­tor ac­tiv­ity. But with re­spon­dents also blam­ing the harsh weather in the North­east for dis­rupt­ing ac­tiv­ity, the de­cline in the in­dex prob­a­bly ex­ag­ger­ates the slow­down in the ser­vices sec­tor.

Econ­o­mists also noted that the Markit sur­vey, which has a short his- tory track­ing the U.S. ser­vices sec­tor, has pre­vi­ously given false sig­nals on the health of the ser­vices in­dus­tries.

"Ob­vi­ously a big drop is note­wor­thy. If noth­ing else, keep an eye open for other signs of a ser­vice slow­down," said Chris Low, chief econ­o­mist at FTN Fi­nan­cial in New York. The more es­tab­lished In­sti­tute for Sup­ply Man­age­ment sur­vey showed the ser­vices sec­tor ex­pand­ing in Jan­uary for the 72nd straight month, though mo­men­tum has slowed since Novem­ber.

A firmer hous­ing mar­ket should help to prop up the econ­omy as it nav­i­gates rough seas caused by a ro­bust dol­lar, spend­ing cuts by en­ergy firms hurt by lower oil prices and slug­gish global de­mand. Ef­forts by busi­nesses to sell off in­ven­tory are hold­ing back growth.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.