October 27, 2010 / 1:56 PM / in 7 years

WRAPUP 5-Mixed U.S. data confirm slow economic growth path

* Durable goods orders rise 3.3 percent in September

* Orders ex-transport fall, business spending proxy slips

* New home sales rise 6.6 percent, prices up (Updates markets to close)

By Lucia Mutikani

WASHINGTON, Oct 27 (Reuters) - Demand for a range of long-lasting U.S. manufactured goods unexpectedly fell last month and a gauge of business spending plans also dropped, underscoring the economic recovery’s tepid pace.

Another report from the Commerce Department on Wednesday showed new home sales continued to bounce along the bottom, leaving intact expectations in financial markets that the Federal Reserve would ease monetary policy further next week.

“You are seeing a convergence in the different sectors of the economy around the slow-growth scenario,” said Zach Pandl, an economist at Nomura Securities International in New York.

Orders for durable goods excluding transportation fell 0.8 percent after rising 1.9 percent in August as bookings for communications equipment tumbled sharply. Economists, who track this core figure closely, had expected a 0.5 percent gain.

Overall orders, however, jumped by 3.3 percent -- the largest increase since January -- lifted by a surge in demand for aircraft. Orders had dropped 1 percent in August and economists had looked for a 2 percent increase in September. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Graphics on:

Durable goods orders: r.reuters.com/huh52q

MBA mortgage indexes: r.reuters.com/bub42q

New home sales: r.reuters.com/kup52q ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

The second report showed new home sales rose 6.6 percent last month to a still-weak 307,000 unit annual rate.

While the durable goods data supported other recent evidence of cooling in manufacturing, the home sales figures pointed to some improvement in the battered housing market, leading traders in U.S. financial market to anticipate less aggressive action from Fed policymakers who meet on Nov. 2-3.

U.S. stocks ended mixed, with the Dow industrial average and S&P 500 weaker and the Nasdaq Composite slightly higher. The dollar pushed into positive territory against major currencies for the year. Prices for U.S. government debt fell.

Analysts expect Fed officials next week to announce bond purchases of at least $100 billion a month to push borrowing costs lower to help rejuvenate the economy’s sputtering recovery from the worst recession in 70 years.

The central bank, which cut overnight interest rates to near zero in December 2008, has already bought about $1.7 trillion worth of Treasury and mortgage-related debt. [ID:nN25168493]

Its decision will be announced a day after Tuesday’s congressional election, which is widely seen as a referendum on President Barack Obama’s performance on the economy. His Democratic Party is seen facing large losses.

BUSINESSES HESITANT TO SPEND

Business spending, which has been growing strongly, is starting to slow down.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business investment, slipped 0.6 percent in September after a 4.8 percent increase in August. Markets had expected a 0.8 percent gain.

“Overall, these figures suggest that the industrial recovery is nearing an end. Without it, the overall economy is going to struggle,” said Paul Dales, a U.S. economist at Capital Economics in Toronto.

The government is expected to report on Friday that the economy expanded at a 2 percent annual rate in the third quarter, a touch faster than the second quarter’s 1.7 percent pace but too sluggish to cut into a 9.6 percent jobless rate.

Last month, overall durable goods orders were boosted by a 105 percent surge in demand for non-defense aircraft and parts that more than reversed a 30 percent plunge in August.

Inventories of durable goods inventories rose for a ninth straight month, while shipments, which go into the calculation of gross domestic product, were down for the second consecutive month.

The housing data added to recent signs of stability in the housing market after a slump in activity following the end of a tax credit for home buyers. Data earlier this week showed sales of previously owned homes increased in September.

Applications for loans to buy homes, a tentative early indicator of sales, rose 3.9 percent last week, a separate report from the Mortgage Bankers Association showed. [ID:nNLLQLE6LJ]

The number of new homes available for sale last month dropped to a 42-year low of 204,000, the Commerce Department’s report showed. At September’s sales pace, that represents eight months’ supply, down from 8.6 months’ worth in August.

Analysts called that a step in the right direction, but cautioned investigations into the processing of foreclosures by some banks could harm the housing recovery.

“Once the (foreclosure) moratoriums end, the new-home market will have to contend with a large number of distress sales again,” said Celia Chen, a senior director at Moody’s Analytics in West Chest, Pennsylvania.

The median sales price for a new home rose 1.5 percent from August to $223,800, the highest since May. Compared to September last year, prices rose 3.3 percent. (Editing by Neil Stempleman)

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