Friday, July 2, 2010

Pending Home Sales Fall; Unemployment Claims Up

Pending home sales in May fell by 30.0 percent to an index level of 77.6 from 110.9 in April, the National Association of Realtors reported yesterday.
The level of pending home sales is 15.9 percent below May 2009. The data reflect contracts signed to purchase a home but not closings, which normally occur with a lag time of one or two months. This was the lowest level of pending home sales in the data series, which dates back to 2001.
Pending home sales in the South saw the largest regional decline, decreasing by 33.3 percent; they are 14.4 percent lower than May 2009. In the Midwest the index fell by 32.1 percent and is 20.2 percent below a year ago. Sales in the Northeast fell by 31.6 percent and are 14.8 percent lower than a year ago. The West saw the smallest decline, but still fell by 20.9 percent and were 15.1 percent below a year ago.
The May pending home sales data are in line with the MBA’s Weekly Applications Survey data, which have showed an 18 percent decline in May and a 15 percent drop in June, following 9 percent increases in the two months prior, indicating that new and existing home sales are likely to continue to fall in the months ahead. The home buyer tax credit has pulled demand for homes forward in the spring and we are now seeing some payback following the end of program, as the deadline for signing contracts was April 30. New home sales fell by nearly 33 percent in May and existing home sales fell by 2 percent.
Meanwhile, for the week ending June 26, seasonally adjusted initial unemployment claims was 472,000, an increase of 13,000 from an upwardly revised 459,000 (previously reported as 457,000) the previous week. The four-week moving average increased by 3,250 to 466,500 from 463,250 the week before, which was initially reported as 462,750.
The advance seasonally adjusted insured unemployment rate was 3.6 percent for the week ending June 19, unchanged from the prior week's revised rate of 3.6 percent, which was estimated at 3.5 percent previously.
The advance number for seasonally adjusted insured unemployment during the week ending June 19 was 4.616 million, an increase of 43,000 from the preceding week's revised level of 4.573 million. The four-week moving average was 4.567 million, a decrease of 25,250 from the preceding week's revised average of 4.592 million.
June’s initial unemployment claims are 1.94 percent higher than April’s level, the second increase in three months. In the 10 months prior to March, claims had fallen in eight of those months. June’s average level of 467,000 claims is the highest since February this year.
In other news, the Institute for Supply Management Manufacturing Index for June decreased by 3.5 percent to 56.2 percent from May’s 59.7 percent, a sign that while both the overall economy and the manufacturing sector continue to grow, the pace of growth is slowing.
A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. A PMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy. Thus, the index indicates growth for the 14th consecutive month in the overall economy and expansion in the manufacturing sector for the 11th consecutive month.
Most component indexes pointed to slower growth, while inventories components indicated that inventories are contracting, but at a slower rate. The index for new orders decreased by 7.2 percentage points to 58.5 percent. This was the 12th consecutive month of growth in new orders. A New Orders Index above 50.2 percent is generally consistent with an increase in the Census Bureau's series on manufacturing orders (in constant 2000 dollars).
The index for production decreased by 5.2 percentage points to 61.4 percent from 66.6 percent. An index above 51 percent tends to be in line with an increase in the Federal Reserve Board's Industrial Production figures. This is the 13th consecutive month that the Production Index has registered above 50 percent. The index for manufacturing employment decreased 2 percentage points to 57.8 percent from 59.8 percent, which was the seventh consecutive month of employment growth in this sector. A value above 49.8 percent is generally consistent with an increase in Bureau of Labor Statistics data on manufacturing employment.
Manufacturers' inventories contracted for the third consecutive month as the Inventories Index decline slightly by 0.2 percentage points to 45.8 percent. An index greater than 42.6 percent is generally consistent with expansion in the Bureau of Economic Analysis' figures on overall manufacturing inventories (in chained 2000 dollars). The index measuring customer’s inventories increased by 6 percentage points to 38 percent in June and was the 15th consecutive month that customer inventories were seen as “too low"

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