Durable Goods Rise for 3rd Consecutive Month, Job Market Healthy, News Home Sales Soar Most in 14 Years, New Home Inventories Fall Most in 26 Years

- Durable Goods Orders for April rose .6% versus estimates of a 1.0% gain and an upwardly revised 5.0% increase in March.

- Durables Ex Transports for April rose 1.5% versus estimates of a .6% increase and an upwardly revised 1.5% gain in March.

- Initial Jobless Claims for last week rose to 311K versus estimates of 305K and 296K the prior week.

- Continuing Claims rose to 2529K versus estimates of 2495K and 2471K prior.

- New Home Sales for April rose to 981K versus estimates of 860K and 844K in March.

BOTTOM LINE: Orders for durable goods recorded a third straight gain last month, the longest streak in almost two years, confirming that manufacturing will help buoy the economy, Bloomberg reported. Orders for non-defense capital goods excluding aircraft, a gauge of future business investment, rose 1.2% versus a 4.4% jump the prior month. Manufacturers had a 1.47 month’s supply of durable goods on hand at the current sales pace, the lowest this year. The last time durables (excluding transports) rebounded this sharply in a three-month period was the first quarter of 2002. I continue to believe manufacturing will add to economic growth this quarter and help boost overall US growth back to around average levels before year-end.

The number of Americans filing first-time claims for state jobless benefits rose from a four-month low last week while remaining at a level that economists say shows resilience in the labor market, Bloomberg reported. The four-week moving-average of jobless claims fell to 302,750, the lowest in more than a year. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, held steady at a historically low 1.9%. I continue to believe the labor market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.

Purchases of new homes in the US unexpectedly surged in April by the most in 14 years, Bloomberg reported. Sales rose 16% to an annual pace of 981,000. “The report starts to seal the argument that the housing market is beginning to stabilize, at least in terms of demand,” said Richard DeKaser, chief economist at National City Corp. The median price of a new home fell from $257,000 to $229,100. The supply of new homes on the market at the current sales pace fell 20% to 6.5 months’ worth from 8.1 months’ worth in March. New home sales soared 28% in the South, 8.5% in the West and 3.8% in the Northeast. Sales fell 4% in the Midwest. Housing has subtracted about one percentage point off US economic growth the last 3 quarters. This was the largest percentage monthly drop in inventory since December 1981. One of the key components to the bear housing collapse/imminent economic collapse argument was that home inventories would skyrocket this spring, sending prices plunging. I continue to believe home sales are stabilizing at relatively high levels by historic standards and that overall housing will subtract less from economic growth as the year progresses.