Home Sales, Goods Orders Probably Rose: U.S. Economy Preview

Home Sales, Goods Orders Probably Rose: U.S. Economy Preview


Sept. 20 (Bloomberg) -- Home sales and orders for long- lasting goods probably rose in August, extending gains that have signaled the U.S. is emerging from the worst recession since the 1930s, economists said before reports this week.

Purchases of new and existing houses climbed to a combined 5.79 million annual pace last month, the most in almost two years, according to the median forecast of economists surveyed by Bloomberg News. Bookings for durable goods likely rose 0.4 percent, the fourth advance in five months, the survey showed.

Housing and manufacturing, two areas that deepened the slump, are stabilizing as stimulus measures such as credits to first-time homebuyers and “cash for clunkers” revive demand. While acknowledging the economy is healing, analysts project Ben S. Bernanke and his colleagues at the Federal Reserve will commit to keeping interest rates low when they meet this week.

“We are coming out of recession and we are in the early stage of a very fragile recovery,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “It’s an infant recovery that needs a lot of care and nurturing, and that means no rate hikes from the Fed.”

Bernanke, the Fed’s chairman, last week said the recession “is very likely over.” The central bank will maintain the benchmark interest rate near zero at least through the middle of next year, according to the median estimate of economists surveyed earlier this month. The policy-making Federal Open Market Committee’s announcement is due Sept. 23.

Fifth Gain

Existing-home sales, which make up more than 90 percent of the market, probably rose 2.1 percent to a 5.35 million unit pace, a fifth consecutive gain, economists forecast before the Sept. 24 report from the National Association of Realtors. As of July, purchases were down 28 percent from the record reached in September 2005.

Data on new houses, due the following day from the Commerce Department, will probably show sales rose 1.6 percent to a 440,000 rate, according to the survey median. They reached a record-low rate of 329,000 in January.

The Obama administration’s $8,000 tax credit for first- time buyers, combined with the plunge in prices as foreclosures climbed, have helped lift sales this year, prompting builders such as Toll Brothers Inc. to get back to work.

Housing starts rose to a nine-month high in August, the Commerce Department reported last week, indicating residential constriction may soon add to growth after subtracting from gross domestic product since 2006.

Builder Shares

The Standard & Poor’s Homebuilder Supercomposite is up 40 percent so far this year, compared with an 18 percent gain for the broader S&P 500. The S&P 500 rose 2.6 percent last week, the best weekly performance in almost two months.

Just as the first-time buyer credit is boosting home demand, the government’s $3 billion cash-for-clunkers incentive to trade in gas-guzzlers for more fuel-efficient vehicles boosted auto sales and production last month.

The projected gain in orders for goods meant to last several years would follow a 5.1 percent surge in July that was the biggest gain in two years. Excluding transportation equipment such as cars and aircraft, orders probably rose 1 percent, economists forecast the Commerce Department will report on Sept. 25.

Carmakers including General Motors Co. and Ford Motor Co. are planning to keep boosting output through the second half of 2009 to rebuild depleted inventories.

More Production

Dealers are “looking for us to take up production,” Mark LaNeve, chief of North America sales at GM, said on a conference call Sept. 1. “We’re continuing to look for ways to squeeze out some more production.”

In another sign the economy is recovering, the index of leading economic indicators probably rose in August for a fifth consecutive month, economists forecast the Conference Board will report tomorrow. The increases mark the gauge’s best performance since 2004.

Consumers are becoming less pessimistic. The Reuters/University of Michigan index of consumer sentiment probably rose to 70.5 this month from 65.7 in August, according to economists’ forecasts before the Sept. 25 report.

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