New home sales weak as durable goods orders sag

WASHINGTON (Reuters) - Sales of new homes were unexpectedly weak last month, although they climbed off an 11-year low, and orders for long-lasting goods fell, according to data on Thursday that underscored the economy's weakness.

A third report showed the number of Americans filing an initial claim for unemployment aid edged down last week, but stayed at a level suggesting some softening in the job market.

The Commerce Department said new single-family home sales rose 4.8 percent in September to an annual rate of 770,000 units from a downwardly revised 735,000 pace in August. Economists had expected a 780,000-home sales pace.

The August figure, the lowest since October 1996, was previously reported at 795,000. Sales for June and July were revised lower as well, showing the market for new homes has been even weaker than had been thought.

"Before we get too giddy about a possible bottom in the market, we do urge our clients to note the sharply revised downward estimate for August," Joseph Brusuelas, chief economist for IdeaGlobal in New York, said in a client note.

"We have a strong suspicion that we will see some major revisions to this data when it is released next month."

Thursday's housing data had little impact among U.S. Treasury traders who expect a modest, 25 basis point cut in a key interest rate when Federal Reserve policy-makers meet next week. Stocks, too, were little changed with the morning data while the dollar fell closer to a record low versus the euro.

On Wednesday, some of the nation's biggest home builders reported large quarterly losses as sales continue to crumble. Pulte Homes Inc (PHM.N), the No. 3 U.S. home builder, and Ryland Group Inc (RYL.N), nation's eighth largest builder, were two that reported large write-downs.

While the rate of new home sales was below analyst expectations, some economists and investors took solace in the fact that underlying trends looked somewhat more promising.

"There is some good news in these numbers with slightly lower inventories and a 2.5 percent rise in the median sales price of a new home. But it's clear that we're not out of the woods -- far from it," said Michael Schenk, senior economist with Credit Union National Association and Affiliates in Washington.

Durable goods orders fell 1.7 percent in September on the back of a sharp drop in transportation orders. Analysts polled by Reuters were expecting a 1.5 percent rise in total orders last month after a 5.3 percent decline in August, earlier estimated as a 4.9 percent decrease.

Even when volatile data for transportation and defense orders were stripped away, the total was weaker than expected.

"From a longer-term perspective, durable goods orders are still running below year-ago levels, not least because of sharply reduced housing-related orders," said Roger Kubarych of UniCredit in New York. "But in the short term, there is nothing in today's report to justify fears of an imminent recession."

Transportation equipment orders fell 6.3 percent on a 37.3 percent slide in defense aircraft and parts orders. Motor vehicle and parts orders were down 2.9 percent. After stripping out transportation, orders rose 0.3 percent, weaker than the 0.7 percent rise analysts were expecting.

In another report, Labor Department data showed the number of U.S. workers filing new claims for jobless aid fell by a much less than expected 8,000 last week, which left claims at fairly high levels.

Initial claims for state unemployment insurance benefits totaled 331,000 in the week ended October 20 following the prior week's upwardly revised 339,000, which originally had been reported as 337,000. Economists surveyed by Reuters had forecast a much lower total of 320,000 claims for last week.

A Labor Department official said there were no special factors to explain last week's numbers, but noted that there might be some volatility in the data due to layoffs and rehiring in the automobile industry linked to recent industrial action.

The number of so-called continuing claims rose by a modest 7,000 to 2.53 million in the week ended October 13, the latest period for which figures were available. The continuing claims total was lower than economists' median forecast for 2.54 million claims.