WRAPUP 5-US home builder mood sours, manufacturing edges up

* Housing market index slips to lowest in 17 mos in Aug

* Index falls for 3rd straight month, down one point to 13

* Empire State manufacturing index rises to 7.10 in Aug

* Weak Japan GDP adds to global economic worries
(Updates markets to close)

By Lucia Mutikani and Wanfeng Zhou

WASHINGTON/NEW YORK, Aug 16 (BestGrowthStock) – U.S. home builders’
optimism hit a near 1-1/2 year low in August and a regional
manufacturing gauge grew more slowly than expected, implying
the economic slowdown continued into the third quarter.

The reports on Monday came on the heels of data last week
showing tepid retail sales growth and benign inflation
pressures in July. Still, most economists do not believe the
U.S. economy is slipping back into recession.

“The manufacturing and housing data confirm that the
slowdown in economic activity continued in the second half of
this year,” said Harm Bandholz, chief U.S. economist at
UniCredit Research in New York. “I still don’t think we will
see a double-dip, but the risks have increased,” he added.

The National Association of Home Builders/Wells Fargo
Housing Market Index slipped one point to 13, defying market
expectations for a rise to 15. It was the third consecutive
month of decline in the index.

A reading above 50 indicates that more builders view sales
conditions as good than poor, but the index has not been above
that level since April 2006.

Separately, the New York Federal Reserve said its “Empire
State” general business conditions index rose to 7.10 in August
from 5.08 in July. However, the reading was below the 8.00
expected by economists polled by Reuters.
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U.S. home builder sentiment graphic

http://link.reuters.com/tun35n
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Further signs of a weak recovery from the longest and
deepest recession since the 1930s ignited a rally in the U.S.
government debt market, with the 30-year bond yield nearing a
16-month low. The benchmark 10-year Treasury yield touched its
lowest level since March 20, 2009.

Investors, piling into safe-haven U.S. Treasury debt, were
also rattled by news that Japan’s economic growth slowed to a
crawl in the second quarter, with gross domestic product growth
of 0.1 percent, which translates to annualized expansion of 0.4
percent. For more, see: [ID:nTOE67901S]

Stocks on Wall Street ended flat and the volume of shares
changing hands was the smallest so far this year. The U.S.
dollar fell against the yen despite the weak Japanese growth
numbers.

The U.S. economy grew at a 2.4 percent annualized pace in
the second quarter, slowing from a 3.7 percent rate in the
first three months of this year.

But trade and business inventory data for June suggested
the government will significantly cut second-quarter gross
domestic product figures when it publishes its second estimates
next week.

WANING GOVERNMENT STIMULUS

The slowdown in the growth pace is largely a reflection of
the winding down of some government stimulus programs,
including a popular homebuyer tax credit, which had helped to
power the recovery that started in the second half of 2009.

The housing sector, which helped trigger the 2007-2009
financial crisis when the subprime mortgage market got out of
control, is struggling to regain its footing following the end
of the tax credit in April.

The NAHB survey showed the current sales conditions gauge
for single-family home sales slipped this month to its lowest
level since June 2009. The sales expectations measure for the
next six months touched its lowest level since March 2009.

“Builders are expressing the same concerns that they are
hearing from consumers right now, particularly the sense that
the overall economy and job market aren’t gaining any
traction,” said NAHB Chairman Bob Jones.

While manufacturing in New York state rose this month, the
Empire State index remained well below its recent high near 32,
reached in April. The survey showed the new orders index fell
below zero for the first time since June 2009.

The reading on business conditions six months ahead fell to
35.71, the lowest since July 2009, from 41.27 in July.

However, the survey contained some encouraging news on
employment, which has been the Achilles heel of the recovery.
The employment index rose to 14.29 in August from 7.94 in July
and the average workweek index jumped to 7.14 from -9.52.

“This report suggests that the manufacturing slowdown of
the past few months has continued into August,” said Nicholas
Tenev, an economist at Barclays Capital in New York.

“However, labor market improvement is apparently continuing
nonetheless, an encouraging sign that recent weakness may prove
temporary as labor income growth fuels the recovery.”

Also on Monday, a survey from the Federal Reserve showed
lending standards eased somewhat over the last three months but
demand for business and consumer loans was largely unchanged.
Some economists have blamed the weak economic recovery on tight
lending standards. [ID:nN16267546]

Adding to uncertainty about the economic outlook, home
improvement chain Lowe’s Cos (LOW.N: ) said on Monday it missed
quarterly profit and sales estimates as benefits from the
homebuyer tax credit and cash for appliances programs waned.
The retailer warned of uncertain demand. See [ID:nN16250437]

“We don’t expect strong industry growth until we experience
consistent improvements in the labor and housing markets, which
likely will not occur until 2011,” Chief Executive Robert
Niblock said on a conference call with analysts.
(Writing by Lucia Mutikani; additional reporting by Pedro
Nicolaci da Costa in Washington; Editing by Dan Grebler)

WRAPUP 5-US home builder mood sours, manufacturing edges up