* Consumer spending rises faster than expected in October
* Applications for jobless aid lowest in more than a year
* Orders for long-lasting goods unexpectedly fall
* New home sales highest in a year
(Adds home sales, consumer confidence, updates stocks)
WASHINGTON, Nov 25 (Reuters) - U.S. consumer spending and
housing sales rose more than expected in October while new
claims for jobless benefits fell sharply last week, suggesting
the economic recovery was gaining traction.
An unexpected decline in orders for long-lasting U.S.
manufactured goods, however, tempered some of the optimism and
was a reminder that recovery from the most brutal recession in
70 years would be gradual.
The Commerce Department on Wednesday reported that consumer
spending, which normally accounts for over two-thirds of U.S.
economic activity, increased 0.7 percent last month after
falling 0.6 percent in September. That was above market
expectations for a gain of 0.5 percent.
"Certainly everybody is looking for the consumer to begin
step up here a little bit in the economy, so this is positive
data," said Tim Ghriskey, chief investment officer at Solaris
Asset Management in Bedford Hills in New York.
The Labor Department said initial claims for state
unemployment benefits slid to 466,000 last week from 501,000
the prior week in the fourth straight week of declines. The
figure was well below market expectations for 500,000.
And sales of newly built U.S. single-family homes jumped
6.2 percent in October to a one-year high, the government
reported.
U.S. stocks rose on the jobless claims and housing data,
which was viewed as a sign that the battered labor market was
gradually healing. Prices of U.S. government bond, a
traditional safe-haven investment, extended losses.
The Commerce Department reported sales of newly built U.S.
single-family homes rose to a 430,000 unit annual pace last
month, from 405,000 units in September.
That beat market expectations for a 410,000 unit pace. The
rise in sales pushed the supply of new homes on the market last
month down to 239,000 units, the lowest level since May 1971.
Analysts said the housing data was a good sign for the
economy, but cautioned that gains reflected buyers' rush to
take advantage of the government's $8,000 tax credit for
first-time buyers that had been scheduled to expire on Nov. 30.
That credit has since been extended into next year.
HOUSING STABILIZING
The housing market, the main trigger of the U.S. recession,
is recovering from a three-year slump.
"We think housing, that is sales of new and existing homes,
housing prices and housing starts, has now finally entered a
bottoming process due in large part to the 80 percent drop in
housing starts over the past three years," said John Canally,
an economist at LPL Financial in Boston.
"It seems, however, that the potential end of the credit
may have pushed people into the market who were on the
sidelines," he added.
Analysts are hoping signs of stabilization in the housing
market will help to improve the psychology of households,
shattered by the highest unemployment in 26-1/2 years.
A separate survey showed consumer sentiment was on the
mend. The Reuters/University of Michigan Surveys of Consumers'
final index of consumer sentiment in November stepped up to
67.4 from 66.0 in the first half of the month.
There are fears that consumer spending may slow in the
fourth quarter because of high unemployment and hold back
economic growth.
The jobless claims are still above the 400,000 level that
analysts say would signal growth in payrolls.
The Commerce report also showed personal income increased
0.2 percent in October after a similar advance the previous
month. That was above market expectations for a 0.1 percent
gain.
Savings fell to an annual rate of $490.3 billion, pushing
down the saving rate to 4.4 percent from 4.6 percent in
September.
In another report, the Commerce Department said orders for
durable goods, which include products such as refrigerators and
computers, dropped 0.6 percent after rising 2.0 percent in
September. Analysts polled by Reuters had forecast orders
rising 0.5 percent in October.
Durable goods orders are a leading indicator of
manufacturing activity.
"It does appear that momentum in manufacturing is weakening
as we move into the end of the year. The manufacturing sector
bears close watching since it is considered a forward indicator
for the economy," said Kenneth Kim, economist at Stone &
McCarthy Research Associates in Princeton, New Jersey.
But Cameron Findlay, chief economist for Lendingtree.com in
Charlotte, North Carolina, said he was optimistic on the
economy because the rise in sales of new homes "is a precursor
to support for labor, materials and construction industries, as
well, thereby contributing towards improvements in GDP."
New durable goods orders excluding transportation declined
1.3 percent last month after rising 1.8 percent in September.
Non-defense capital goods orders excluding aircraft, a
closely watched proxy for business spending, fell 2.9 percent
last month after rising by a hefty 2.6 percent in September.
(Reporting by Lucia Mutikani and Mark Felsenthal; Editing by
Leslie Adler)
((lucia.mutikani@thomsonreuters.com; Tel: 202 898 8315;
Reuters messaging: lucia.mutikani.reuters.com@reuters.net))
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