New Home Sales Continued Firm

May new single family home sales continued unexpectedly firm and rose 4.6% m/m to 1.234 million (SAAR). The rise was third consecutive monthly increase and followed a 5.9% April gain that was little revised. Consensus expectations had been for a slight decline in sales to 1.15M during May.

Despite these signs of strength, new home sales so far this year are down 10.3% from the 2005 average and May sales were 9.7% below the monthly peak last July.

Sales down South posted the third consecutive firm m/m increase with a 6.0% gain (8.4% y/y). Year to year, that's the only region of country where sales were up. During May, sales in the Northeast fell 7.9% (-36.3% y/y), sales in the Midwest rose 2.7% but were off 20.8% y/y while in the West sales rose 5.3% in May but were down 12.7% y/y.

The number of new homes for sale dipped 0.7% m/m in May but were up a sharp 23.6% y/y. The year to year breakdown by region is as follows: Northeast, 52.8%; West, 27.2%; South, 31.0%; Midwest, -2.8%.

The median sales price of a new single family home fell 4.3% m/m to $235,300 following a 3.9% rise during April that was very much upwardly revised.

Movin' On Up from the Federal Reserve Bank of St. Louis is available here.

Can Financial Innovation Help to Explain the Reduced Volatility of Economic Activity? from the Federal Reserve Board can be found here.

European measures of confidence for June are beginning to appear. Last Friday Belgium reported a surprisingly large increase in business confidence. The National Bank of Belgium's overall gross synthetic indicator of business confidence rose 8.1 point from May to June and reached 10.2%, the highest value on record since the series began in January, 1980. The Bank also calculates a smoothed series, excluding outliers, that reflects the underlying trend of confidence. The smoothed series is only available after a delay of three to four months. Both the current indicator and the smoothed series are shown in the first chart. The continued rise in the current indicator suggests that the underlying trend in consumer confidence is still positive.

Consumers in Belgium are less confident than the business community. While they have shown a small increase in confidence recently, it has been more a case of a decline in the excess of pessimists over optimists.In June, the consumer indicator of confidence was -2% compared with -6% in May and -11% in June, 2005. Chart 2 compares the Belgian consumer and business confidence indicators.

In contrast to Belgium, business confidence in France has been slipping since April when a recent peak of 109 was reached. Confidence measured 107 in June, down almost 1% from 108 in May, but up 7% since June, 2005. Chart 3 compares the measures of business confidence in France and Belgium. While the levels of confidence are not comparable, the trends in the two series can be compared. Until recently business confidence in France has tended to follow the same ups and downs as business confidence in Belgium. Since April, the trends have diverged. (The Belgian series is expressed as a percent balance between optimists and pessimists while the French series has been constructed so that it has an average of 100 and a standard deviation of 10.)