New data quells fears over fresh US recession

Pending sales of previously owned US homes rebounded unexpectedly in July and new claims for jobless benefits fell last week, helping dampen fears the economy could face a double dip recession.

The data yesterday, including sturdy sales from US retailers last month, followed a report on Wednesday showing a surprising gain in manufacturing activity and suggested the economy retained some underlying strength.

Investors appeared to agree earlier fears of a double-dip recession might have been overdone as they sold long-dated US government bonds and bought some stocks.

The National Association of Realtors’ Pending Home Sales Index, based on contracts signed, rose 5.2 per cent in July from a month earlier. Analysts had expected the index, which leads actual sales by a month or two, to fall one per cent.

Home sales have dropped sharply since a popular tax credit for home buyers ended in April and the surprise gain in pending sales raised hopes the sector could soon stabilise.

A separate report from the Labor Department showed initial claims for state unemployment benefits dropped for a second straight week last week, slipping 6,000 to 472,000.