Doubt over US home sales recovery

New York: US home sales probably fell in February, while orders for long-lasting goods climbed, a reminder of an economic recovery reliant on manufacturing as housing struggles, economists said before reports this week.

Combined purchases of new and existing homes fell 4.3 per cent to a 5.4 million annual pace, according to the median forecast of economists surveyed by Bloomberg News. Durable-goods bookings increased 1.2 per cent last month, other data may show.

The prospect of more home foreclosures may drive prices down further, limiting new construction and straining household balance sheets. Factories have picked up the slack as exports grow and companies step up equipment purchases, underscoring the Federal Reserve's view of an economy on a "firmer footing".

"Manufacturing is making quite a lot of difference; it has been the real strength of this recovery," said Rob Carnell, chief international economist at ING Bank in London. "Housing is not contributing at all to the US recovery. It's bumping along the bottom."

Sales of existing homes fell 4.7 per cent to a 5.11 million annual pace, economists surveyed by Bloomberg forecast the National Association of Realtors will report today. Commerce Department figures two days later may show demand for new homes rose 2.1 per cent to a 290,000 pace. The gain would follow a 13 per cent plunge that may have been partly due to bad weather. Purchases reached an all-time low 274,000 pace in August.

Orders for durable goods rose in February after a 3.2 per cent jump the prior period, economists forecast the Commerce Department will report March 24. Capital goods orders probably climbed 3.7 per cent, the third gain in four months, according to the median projection.

Auto sales rising

The US auto industry is enjoying six straight months of increasing sales. US purchases at General Motors, Toyota Motor and Ford Motor in February exceeded analysts' estimates as industrywide sales rose to a 13.38 million annual rate, the fastest in 18 months.

"We still see good signs of progress despite some of the challenges that do remain in the US market," Donald Johnson, vice president for GM's North America sales, said on a teleconference on March 1.

The business spending that helped lead the economy out of recession in mid-2009 may accelerate this year, helped in part by President Barack Obama's December compromise with congressional Republicans on taxes. Companies will be able to depreciate 100 per cent of investments in capital equipment this year and 50 per cent in 2011.

Demand from fast-growing countries like China and Brazil is spurring US exports of machinery and consumer goods. American exports in January rose to the highest level on record.

Ford Motor and Boeing are maintaining global production while waiting for partners in Japan to determine how long it will take to get back to full production schedules in view of disruptions caused by the natural disasters in Japan.

Fed policy makers noted the bifurcation of the recovery in their March 2 Beige Book survey of regional economies through mid-January.

Eleven of 12 Fed districts reported "that manufacturing activity improved," while residential sales and construction "remained at low levels across all districts."

Homebuilder shares have underperformed the broader stock market since the middle of last year. The Standard & Poor's Supercomposite Homebuilder index of 12 builders has declined 9.7 per cent in the 12 months ended March 18, compared with a 9.7 per cent increase for the S&P 500 Index. The S&P Machinery Supercomposite Index is up 40 per cent during the same period.

The foreclosure inventory rose to a record 2.2 million in January, with another 4.7 million households non-current on their mortgages or headed for foreclosure, Lender Processing Services, based in Jacksonville, Florida, said in a February report on its website.