New housing data badly misses estimates, clouding the US economic outlook
- Pending home sales dropped for the month of December, while analysts expected to see the gauge rise.
- The S&P 500 index fell on the news before paring losses.
- It's one of two signals of softness this week out of a housing market that has otherwise showed signs of strength.
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US pending home sales dropped 4.9% Wednesday, surprising markets that had been expecting to see a modest increase.
The S&P 500 index dipped to lows for the session after the release, trading down as much as 0.1%, and 0.6% from the morning's highs, before paring losses.
Consensus estimates predicted that the gauge, a key indicator of health in the US economy, would rise 0.5% for the month of December. It is not only soft data in the housing market - new home sales surprised Wall Street by falling to a five-month low Tuesday, Bloomberg reported. But it is a contradictory signal in a housing market that has otherwise been heating up. The pace of existing home sales, which makes up about 90% of all home sales, for December jumped to an almost two-year high on January 22.
To be sure, one miss may not be emblematic of a broader pullback, said Ian Shepherdson, chief economist at Pantheon Macroeconomics. "Our guess is that the reported drop says more about the difficulty of seasonally adjusting the data across the year-end and/or the shortage inventory of homes for sale than it says about the underlying trend," he said in a Wednesday note.
Still, the gauge is widely seen as a leading indicator for both the housing market and the US econony: "Pending home sales track contract signings rather than closings, and tend to lead the existing home sales data by 1-2 months," said Goldman Sachs analyst Jan Hatzius in a Wednesday note, adding that the South had the most extreme pullback, though dips occured across all regions.
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