New home sales decline
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March 2, 2000: 10:36 a.m. ET
January rate drops 4.2%; leading indicators up, online report debuts
By Staff Writer M. Corey Goldman
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NEW YORK (CNNfn) - Sales of new homes throughout the United States slowed in January following a year-end surge, the government reported Thursday, while a private report on leading economic indicators suggested the economy is on track for a slightly more moderate pace of growth.
A separate, new report from the Commerce Department indicated consumers are embracing Internet shopping, spending a healthy amount on things on retail goods such as books, CDs and clothing in the fourth quarter.
New home sales declined 4.2 percent to a seasonally adjusted annual rate of 882,000 units in January, just above analysts' estimates of 880,000 but below December's revised gain of 4 percent to 921,000 units, the Commerce Department said. December's figure was initially reported as a 4.2 percent increase to a 900,000-unit pace.
Separately, the Conference Board said its index of leading indicators gained 0.3 percent to 109 in January, just above the 0.2 percent increase forecast by economists but less than the 0.4 percent gain registered a month before. The index, which aims to forecast the U.S. economy's progress six to nine months ahead, uses 1992 as a base of 100.
No slowing just yet
Together, the reports provided signals for investors that the U.S. economy's rapid progress may be starting to moderate somewhat, particularly in the white-hot housing market. The Federal Reserve's series of interest rate increases have sparked higher borrowing costs and damped enthusiasm in the home-buying market.
At the same time, the numbers convinced few that slowing housing activity and tame leading indicators mean the U.S. economy is beginning to slow. Michael Moran, chief economist with Daiwa Securities, told CNNfn he still expects more inflation-fighting, growth-slowing rate increases from the Fed. (203K WAV) (203K AIFF)
"You're seeing a little bit of influence from higher interest rates," he said. "What I would conclude is that we are backing away from the robust levels of housing activity we saw in the spring and summer of last year, but there is by no means a swoon going on in housing activity just yet."
The Fed already has raised rates four times since last June to slow growth. Even with the rate increases, however, little evidence of slowing activity has surfaced. Last week, the Commerce Department reported that the economy grew at a 6.9 percent pace in the fourth quarter, its strongest showing in more than three years. And consumers are still on a tear, according to other reports, with little interest in keeping their money in the bank.
Shrugging off higher rates
One sector of the economy that does appear to be flinching in the face of rising rates is the housing market. The Fed's rate rises have spurred long-term bond yields to rise significantly in the past six months. Because bond rates are directly linked to mortgage rates, consumers are paying more to finance the purchase of a new or existing home.
Even so, "there is as yet no clear sign of a downturn in sales, despite the rise in mortgage rates over the past year," said Ian Shepherdson, chief U.S. economist with High Frequency Economics. "People are still shrugging off the rise in rates."
Home sales fell in most areas of the country, except the Northeast, where they rose 5.7 percent to an annual rate of 93,000 units. In the Midwest, sales fell 8.7 percent to 137,000 while in the South they eased 2.8 percent to 415,000. In the West, sales fell 7.0 percent to 238,000.
And consumers got a bit of a break on housing costs in the first month of the new year. The median home price fell to $154,400 from a revised $164,000 in December. The mean price fell to $194,800 from $203,800 in December.
Tallying up e-commerce
A separate report on e-commerce, the first of its kind from the Commerce Department, indicated consumers spent $5.3 billion on online purchases in the fourth quarter, accounting for roughly 0.6 percent of all retail sales in the final three months of the year.
Commerce polled some 12,000 retail firms to collect the data, though several categories were excluded from its roster, notably travel and financial services, because they were not considered true retailers. If they had been included, Commerce said, the quarterly figure would have been double.
The U.S. Census Bureau -- a data collection agency of the Commerce Department -- plans to release e-commerce figures on a quarterly basis. In addition, the department said it is tracking a separate annual survey of 1999 online purchases made at the wholesale and manufacturing levels and of various services and transportation. No release date was set for that report.
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