US Economic Update

U.S. new home sales start fourth quarter on high note

New home sales rose 3.4% in November to a seasonally adjusted annual rate of 1.047 million units, higher than the market forecast for a 1.6% increase.  October’s sales were revised slightly downwards to show a 3.8% drop (previously reported as showing a 3.2% decrease). The larger-than-expected gain in sales makes this report bond-negative.

New sales of single family homes rose 3.4% in November and are down 15.3% from year-ago levels, an improvement from October’s year-over-year decline of approximately 25%. 

The median price rose 5.8% on a year-over-year basis after being unchanged in October. The months’ supply of homes at current selling rates, a measure of supply, dropped to 6.3 and was downwardly revised in both October and September, suggesting that inventories, while still high, are moving towards more manageable levels. 

Yesterday’s report is consistent with RBC Economics’ view that housing market activity will be less of a drag in the fourth quarter after collapsing 18.7% in the third quarter.

No more major Canadian releases this year; pace picks up in first week of the New Year

There are no major Canadian economic data releases scheduled for the remaining days of 2006 and the first two open-market days of 2007. However, the first week of 2007 ends with a bang. Markets will get a close look at the state of pipeline inflation pressures with the publication of the industrial product and raw materials price indexes and Thursday, January 4. Readings on the health of the domestic economy will come in the form of the jobs report and Canada’s purchasing managers index on Friday, January 5.

Information contained in this report has been prepared by the Economics Department of RBC Financial Group based on information obtained from sources considered to be reliable. While every effort has been made to ensure accuracy and completeness, RBC Financial Group makes no such representation or warranty, express or implied. This report is for information purposes only and does not constitute an offer to sell or a solicitation to buy securities.

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