US home sales and Atlantic factory data disappoint

Disappointing new economic data from the US has raised further fears over its ability to recover from recession.

Manufacturing output in the central Atlantic region of the US fell again in August as orders and shipment growth slowed, figures from the regional Federal Reserve Bank of Richmond showed.

The Richmond Fed's composite index of factory activity in its district slumped to -10 in August from -1 in July, below many economists’ expectations, adding to fears that growth at US factories could be stalling.

Analysts had expected a fall to about -5.

That view was compounded by house sales data that showed new home sales in the US fell for the third month a row in July.

Sales fell 0.7 per cent in July to a seasonally adjusted annual rate of 298,000, the Commerce Department said, against expectations for a gain of one per cent.

According to the National Association of Home Builders each new-build creates an average of three jobs and $90,000 in taxes.

The Richmond Fed is the third regional bank to issue manufacturing figures. The Philadelphia Fed last week published disastrous figures showing manufacturing plunged to -30.7 from July’s 3.2 to its lowest level since March 2009, causing markets to slump further.

“This is the third regional Fed survey showing deteriorating conditions in August. If the August national ISM index were to follow the regional Fed surveys, it would end up in the low 40s, dangerously close to recessionary levels,” said ING economist Teunis Brosens.

Brosens added that new home sales had been “basically flat” since last May, when a tax credit to improve homebuying was cut.

“The climate for homebuilders remains ice-cold. They are battling against foreclosures and short sales that change owners at discounted prices,” he said.

“Any pickup in demand will first have to show up in existing home sales and eat into excess supply, before new homes become an attractive alternative. For now, lifeless new home sales remain the showcase of the bad state of the US housing market.”