Today's Indicators

US new home sales increased almost 10% more than forecasted in July, and, perhaps more important, unsold inventories dropped to 7.5 months worth of supply, the lowest that number has registered since April. 2007. There was a huge 32% increase over June in the Northeast. Too bad most of the troubled properties are in the West. Still, even the South registered a 16% monthly rise (don’t know how benighted Florida performed v. other states in the region).

This big number, taken in tandem with yesterday’s Consumer Confidence figure, provides a much-needed boost to the notion that the US consumer sector is finally starting to respond to the electroshock therapy provided by the monetary and fiscal dollops thrown at it (very indirectly regarding monetary policy: banks still aren’t lending). Friday’s personal income reading will be decisive in gauging whether or not this view is really robustly supported. Pesonal incomes have been on life support all year, with gains coming only from government transfers, which are now thinning out.

Interestingly, builders are beginning to buy land again, after a three-year hiatus. Housebuilder stocks are boooming on Wall Street these days.

US durable goods orders also surged in July, led by purchases of aircraft. Capital goods orders increased by a quite-respectable 9.5%, consituting the best performance in this area since December, 2007. This is important, because business investment, like consumer spending, really needs a vigorous push if this recovery is to become at all sustaining. But even here, caution is in order:

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, slipped 0.3 percent in July, the Commerce Department said.

Analysts polled by Reuters had expected core capital goods to increase 1 percent. The prior month was revised to show a 3.6 percent rise, previously reported as a 2.6 percent increase.

Durable goods orders are a leading indicator of activity in manufacturing, which in turn provides a good barometer for overall business health.

Durable goods inventories fell 0.8 percent in July, after declining 1.5 percent the prior month..

Germany, with its big capital goods exporters, also saw a bigger rise in business sentiment in July than forecast.

In addition, as cannot be emphasized enough, the process of deleveraging the vastly bloated debt of the US consumer and corporate sectors has scarcely begun. It is very difficult, indeed, to see how sustainble upticks in either is possible given this constraint, especially with prospects for employment, wages, corporate defaults, less government largesse and the possibility of higher taxes all added into the mix.

Finally, the death of Senator Kennedy may resuscitate the public option in some sort of form. God knows what that means for the bond vigilantes and exit-strategists….