New U.S. single-family home sales slumped to the slowest pace on record in July and orders for costly durable goods were weak, according to government reports on Wednesday that heightened fears the economy was at risk of a new downturn.
The Commerce Department said single-family home sales plummeted 12.4% to a 276,000 unit annual rate from a downwardly revised rate of 315,000 in June.
"I wouldn't say this is proof of a double dip, but clearly the economy is slowing markedly, and it's a broad-based slowdown," said Michael Woolfolk, senior currency strategist with BNY Mellon in New York.
The manufacturing sector, as well as the housing sector, appeared to be weakening, according the data.
The Commerce Department said new orders for long-lasting U.S. manufactured goods excluding transportation equipment posted their largest decline in 1-1/2 years in July while overall bookings rose far less than expected.
U.S. stock indexes initially fell on the housing report but recovered losses. Treasury debt prices added to gains, while the dollar erased gains against the yen.
FALSE BOTTOM IN HOUSING
Weakness in home sales was exacerbated by the end of a popular housing tax credit for first-time buyers that had helped boost sales previously.
"What we are seeing is the downside of government intervention. It had fanned expectations of a market bottom when in fact, it created a false bottom," said Tom Porcelli, a senior economist at RBC Capital Markets in New York.
The weak sales pace last month resulted in the supply of new homes available for sale spiking to 9.1 months' worth from 8.0 months' worth in June.
The number of new homes on the market was unchanged at 210,000 units. The median sale price for a new home fell last month from June to $204,000, the lowest since December 2003.
Separately, demand for home loans was moderate last week despite very low mortgage rates.
Mortgage purchase and refinancing applications rose by less than 1.0% in the first week of August, even as 30-year loan rates fell to 4.57% — the lowest in 20 years — the Mortgage Bankers Association said.
AIRCRAFT DISTORT DURABLE GOODS
The durable goods orders report showed orders excluding transportation down 3.8% — the biggest monthly drop since January 2009 — after rising 0.2% in June. Overall orders rose 0.3% following a revised 0.1% fall in June.
Durable goods orders are a leading indicator of manufacturing and last month's moderate increase was the latest indication the sector that has been the main driver of the economy's recovery from the worst downturn since the Great Depression is losing some steam.
Overall orders last month were lifted by the volatile commercial aircraft component, which jumped 75.9% after a surprise 25.3% fall in June. Defense aircraft orders dropped 8.3% after rising 5.7% in June, while motor vehicle orders rose 5.3% after June's 4.0% rise.
