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US home sales rise in August, Q3 forecasts in tact

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September 28
8:00 AM 2015

Though US business investment marginally eased in August, the new home sales on the upward move during August. The latest data for August indicates that the US economy is not impacted much in line with ongoing global unrest. The US economy is growing as per the forecast for GDP growth rate of 1.4 percent for the third quarter.

Barring aircraft and defense equipment, business investment showed a marginal drop of 0.2 percent during the month. The August' drop comes close after gains in July that were considered to be the biggest upward movement in the year boosting business confidence that American corporate sector is not disturbed by the sluggish global economy. New home sales in August rose 5.7 percent to annual growth of 552,000 indicating highest level since 2008. This growth in home sales was higher than the forecasts.

After registering a drop in business investment on equipment during the April-June quarter, the latest marginal improvement in orders is indicating economic growth for the third quarter.

However, the 0.2 percent drop in business spending is marginally higher than the forecasts made by analysts. Orders for durable goods were dropped by two percent in the line of projections. Civilian aircraft segment registered steep fall barring transportation sector.

The number of Americans filing new applications for jobless benefits was up very marginally giving positive signals for the US economy. The US Commerce Department capital goods orders barring military wares and aircraft were slightly down.

The US Labor Department said that claims for unemployment benefits rose 3,000 to 267,000 for the week ended 19 September. The marginal rise in claims for jobless benefits is sending bullish signs about the US labor market. The positive signs in the labor market are very important for the US Federal Reserve in making decisions on interest rate hike.

The drop in commodity prices affects some businesses. Caterpillar Inc recently announced that it might shut some plants or consolidates over 20 plants globally. It has taken a decision to shut some plants in construction, resources, energy and transportation. Caterpillar Inc has revised lower its revenue forecast for 2015 and may slash 10,000 jobs up to 2018.

This is an example of how large companies are also affected by adverse conditions in the commodities sector. The four-week moving average of unemployment claims fell 750 to 271,750 indicating its lowest since 2000. This indicates improvement in the job market.

Mining and energy sector are witnessing the crisis-like situation of late and this is impacting major global corporate firms in a negative way. Caterpillar stock dropped six percent on Thursday trading. The economic data indicates that robust job growth has helped the housing market, which was hit severely in the 2007-09 recession.

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