Strong jump in US home sales fuels hopes of turnaround

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The Independent Online

Economists saw a tuft of green shoots in the latest data from the US, as indicators from the manufacturing sector and the housing market all beat their gloomy forecasts.

For the second time this week, government figures showed that home buyers were returning to the market in unexpectedly strong numbers, lured by cheap mortgage deals and bargain prices. Sales of newly-built one-family homes increased by 4.7 per cent to a seasonally adjusted annual rate of 337,000 in February, the Commerce Department said.

In January sales had fallen more than 13 per cent, and economists had been braced for another month-on-month decline.

Last month's rise was the first since July 2008, before the collapse of Lehman Brothers in September triggered a financial panic and a new leg down by the US economy.

"We are prepared to hazard the view that the post-Lehman meltdown is now over and the market is stabilising," Ian Shepherdson, the chief US economist at High Frequency Economics, said. "That's not the same as a recovery, but it is better than continued declines in sales."

Sales remain at depressed levels, some 41 per cent below the rate in February, and a glut of unsold homes is likely to keep prices falling for some time to come, observers say. The average price of a new home in the US was $200,900 in February, down 18 per cent on a year ago.

Orders received by manufacturers for durable goods – such as machinery, computer hardware, vehicles and big consumer items – rebounded unexpectedly in February, although a sharp downward revision to January's figure meant the rebound came from a lower base.

There was a sharp decline in inventories of unsold goods, however, suggesting that the sharp contraction in output has allowed manufacturers to adjust to slower demand, potentially laying the foundation for a return to growth this year, according to some economists. "There is hope," suggested Stephen Stanley, the chief economist at RBS Greenwich Capital in Greenwich, Connecticut.

"This is exactly the progression that needs to happen, so today's data represents an important step on the road to recovery," he added.

The signs of life in the US economy tempted Barclays to call the bottom of the global recession. Its strategists yesterday launched a quarterly outlook document entitled Green Shoots Have Arrived and said it was time for investors to seek out riskier assets than government bonds.

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