Surge In Aircraft Lifts U.S. Durable Goods Orders

A 37.2% m/m surge in orders for aircraft raised durable goods orders in July by 1.7% versus Consensus expectations for a 1.0% rise. Less aircraft durable orders fell 0.5% (+8.3% y/y), the third m/m decline in the last four.

The rise in new aircraft orders was powered by a doubling of orders for commercial aircraft that offset a one-third drop in defense aircraft bookings.

Higher aircraft orders raised the nondefense capital goods total by 9.0%, but less aircraft capital goods orders rose just 0.6% (11.0% y/y).

Orders for computers & electronic products fell 3.8% (+2.0% y/y), the third m/m decline in the last four. Computer orders fell 6.7% (-0.6% y/y) though a 5.0% rise in electrical equipment, appliance & component orders recouped half of the prior two months' decline. Machinery orders added 2.1% (18.0% y/y) to a 1.1% rise in June.

During the last ten years there has been a 58% correlation between the y/y change in durable goods orders and the orders component of the Philadelphia Federal Reserve's Business Outlook Survey. That correlation rose to 72% during the last five years.

Shipments of durable goods rose 0.1% (8.3% y/y) after a 1.1% June gain. Shipments excluding the transportation sector rose 1.7% (+12.6% y/y) after a 1.2% spurt in June.

Durable inventories rose 0.8% (3.4% y/y) for the third straight month.

New research from the Federal Reserve Bank of New York titled "The Relationship between Manufacturing Production and Goods Output" is available here.

Sales of new one-family homes fell a sharp 6.4% in July to 1.134M, the lowest level since last December. Sales in June were revised down sharply to 1.211M from the initial report of 1.326M. Consensus estimates had been for sales of 1.300M.

Sales fell hard in the Northeast by 23.5% (-19.5% y/y) and in the South by 15.9% (-5.9% y/y). In the West sales slipped 1.7% (-4.0% y/y) for the third decline in the last four months. Sales in the Midwest rose a solid 21.5% (17.1% y/y).

The median price of a new single family home fell 2.6% to $207,400 (9.0% y/y), 5.6% below the February peak of $219,600.

During testimony before the Senate Banking Committee, Fed Chairman Greenspan indicated in response to a question about soaring house prices, "This observation raises the possibility that real estate prices, at least in some markets, could be out of alignment with the fundamentals." The complete Monetary Report to Congress is available here.

The index of mortgage applications compiled by the Mortgage Bankers Association fell 6.3% last week but during the prior period applications were up 11.9% due to a surge in refinancings.

Purchase applications fell 5.0% last week and so far this month are 2.4% below July.

During the last ten years there has been a 59% correlation between the y/y change in purchase applications and the change in new plus existing home sales.

Applications to refinance mortgages slipped 8.0% following the prior week's surge. Refi's so far in August are 9.0% ahead of July which rose 17.3% versus June.

The effective interest rate on a conventional 30-Year mortgage was stable at 6.05%, the average for August so far. That is down from 6.24% averaged last month and the high of 6.53% in May. The effective rate on a 15-year mortgage also was about stable at 5.47% versus 5.69% last month.

The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site here.