US manufacturing, housing data buoy economic outlook

Dec 25 2013, 15:23 IST
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While another report showed new home sales slipped in November, sales in October were revised to show the highest pace in more than five years. Reuters While another report showed new home sales slipped in November, sales in October were revised to show the highest pace in more than five years. Reuters
SummarySales in October were revised to show the highest pace in more than five years.

Orders for long-lasting US manufactured goods surged in November and a gauge of planned business spending on capital goods recorded its largest increase in nearly a year, pointing to sustained strength in the economy.

While another report on Tuesday showed new home sales slipped in November, sales in October were revised to show the highest pace in more than five years. In addition, house prices rebounded, underscoring the economy's improving fundamentals.

"We are coming out of the shadows of the Great Recession in many ways," said Robert Dye, chief economist at Comerica in Dallas.

The Commerce Department said durable goods orders jumped 3.5 percent last month as demand increased for a range of goods from aircraft to machinery and computers and electronic products.

The increase, which outpaced economists' expectations for a 2 percent rise, more than reversed a drop in October. Excluding transportation, orders recorded their largest gain in six months.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, surged 4.5 percent. The increase snapped two straight months of declines and was the largest advance since January.

The increase in these so-called core capital and overall durable goods orders suggested strength in manufacturing and was further evidence of a firming economic growth outlook.

It narrows the gap with sentiment surveys that have offered a more upbeat view of manufacturing than government data.

"Sentiments were showing things were good but not the hard numbers. Things seemed to have turned now," said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina. "Businesses going into 2014 are more confident in their outlook."

From consumer spending to employment and trade, the foundations appear to be in place for sustained and strong economic growth in 2014.

In a second report, the Commerce Department said new home sales fell 2.1 percent to a seasonally adjusted annual rate of 464,000 units. However, October's sales were revised to a 474,000 unit pace, which was the highest level since July 2008.

Despite the fall, home sales retained the bulk of the previous month's 17.6 percent increase.

The reports are the latest to support the U.S. Federal Reserve's decision last week to start trimming back its monthly bond purchases from January, a process which is likely to continue for much of next year.

GROWTH OUTLOOK BRIGHT

U.S. Treasuries prices fell with benchmark yields hovering near three-month highs as investors trimmed their bond holdings in thin trade before Christmas. U.S. stocks were little changed, while

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