Wednesday, November 28, 2007

Durable Goods Orders Decline, Existing Home Sales Fall Slightly

- Durable Goods for October fell .4% versus estimates of a .1% decline and a 1.4% fall in September.

- Durables Ex Transports for October fell .7% versus estimates of a .3% gain and an upwardly revised 1.1% gain in September.

- Existing Home Sales for October fell to 4.97M versus estimates of 5.0M and 5.03M in September.

BOTTOM LINE: Orders for US durable goods fell more than forecast in October, Bloomberg reported. Bookings for non-defense capital goods excluding aircraft, a gauge of future business investment, fell 2.3%, the most since February, after a 1.2% increase in September that was larger than previously thought. Boeing(BA) had orders for 56 aircraft in October versus 132 the prior month. However, demand this year so far for their planes reached a record 1,047. I expect durable goods order to bounce back next month on inventory rebuilding and better-than-expected demand.

Sales for previously owned homes fell slightly more than forecast last month, Bloomberg reported. The median home price is now $207,800. The number of homes for sale at the current sales pace is 10.8 months’ worth. Existing home sales fell 1.7% in the Midwest and 4.4% in the West. Sales were unchanged in the Northeast and the South. I expect sales to bounce higher next month as the average 30-year mortgage rate has declined 54 basis points since June and there is likely some pent-up demand at this point. Fed fund futures now imply a 94% chance for a 25 basis point rate cut at the upcoming December 11th meeting and a 6% chance of a 50 basis point cut.

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