Durable Goods Orders Strong, New Home Sales Unexpectedly Rise, Home Inventories Fall

- Durable Goods Orders for July rose 5.9% versus estimates of 1.0% and an upwardly revised 1.9% gain in June.

- Durable Ex Transports for July rose 3.7% versus estimates of a .6% gain and a downwardly revised 1.2% decline in June.

- New Home Sales for July rose to 870K versus estimates of 820K and an upwardly revised 846K in June.

BOTTOM LINE: Orders for US-made durable goods rose more than forecast in July, suggesting business spending remains healthy, Bloomberg reported. Orders for autos rose 9.8%, the biggest increase since January 2003 versus a .7% decline in the prior month. Non-defense capital goods orders excluding aircraft, a gauge of future business spending, rose 2.2%, versus a .1% decline in June. The gain in ex-transport orders was propelled by demand for machinery, communications gear and primary metals. I expect business spending to remain healthy over the intermediate-term as companies gain confidence in the sustainability of the current expansion and continue to rebuild depleted inventories.

Sales of new homes in the US unexpectedly rose for the second time this year in July, suggesting the housing market is stabilizing, Bloomberg reported. The median sales price of a new home rose .6% to $239,500. Inventories of unsold homes at the current sales pace fell to 7.5 months worth at the current sales pace. This is down from 8.3 months supply worth in March. Sales soared 22% in the West and rose .6% in the South. Sales fell 24% in the Northeast and .9% in the Midwest. New home sales are considered a leading indicator of demand because they are recorded when an agreement is signed. The decline in inventories is a large positive. I continue to believe home sales are in the process of stabilizing at relatively high, by historic standards, levels.