Sales of new U.S. single-family homes increased more than expected in May and business activity contracted moderately this month, suggesting the economy was on the cusp of recovering from the recession caused by the COVID-19 crisis. But a resurgence in confirmed coronavirus cases across the country threatens the nascent signs of improvement evident in Tuesday’s economic data. New home sales jumped 16.6% to a seasonally adjusted annual rate of 676,000 units last month, the Commerce Department said. New home sales are counted at the signing of a contract, making them a leading housing market indicator. Last month’s increase left sales just shy of their pre-COVID-19 level.
Sales dropped 5.2% in April to a pace of 580,000 units. Economists polled by Reuters had forecast new home sales, which account for about 14.7% of housing market sales, rising 2.9% to a pace of 640,000 in May. New home sales are drawn from building permits. Sales surged 12.7% from a year ago in May. The report followed on the heels of data last week showing home purchase applications at an 11-year high in mid-June and permits rebounding strongly in May. The broader economy slipped into recession in February, leaving nearly 20 million people unemployed as of May.
In a separate report on Tuesday, data firm IHS Markit said its flash U.S. Composite Output Index, which tracks the manufacturing and services sectors, rose to a reading of 46.8 in June from 37 in May. A reading below 50 indicates contraction in private sector output. The improvement was led by an ebb in the manufacturing sector downturn, with the flash Purchasing Managers Index climbing to 49.6 from 39.8 in May. The survey’s services sector flash PMI rose to 46.7 from 37.5 in May.
Last month’s increase in new home sales did little to offset a plunge in sales of existing homes in April and May, leaving intact economists’ expectations for a record tumble in residential investment in the second quarter. Homebuilding also rebounded moderately in May after slumping in April. Last month, new home sales shot up 45.5% in the Northeast and advanced 29% in the West. They rose 15.2% in the South, which accounts for the bulk of transactions, but fell 6.4% in the Midwest. The median new house price rose 1.7% to $317,900 in May from a year ago. New home sales last month were concentrated in the $200,000 to $400,000 price range.
Source: Reuters
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