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Analysts at Nomura note that US new home sales rose 6.7% m-o-m to 689k in May, above expectations (Nomura: +0.5% to 665k, Consensus: +0.8% to 667k), from a downwardly revised April reading of 646k.

Key Quotes

“New home sales in the South jumped sharply by 17.9% in May after falling 4.1% in April and 1.1% in March. Sales in the Midwest were flat while sales in the Northeast and West declined.”

“Altogether, excluding the South, new home sales declined 6.4% m-o-m.”

“In our view, the strong increase in the South in May appears unsustainable and implies increased risk of mean reversion in June.”

GDP tracking update: The May new home sales report suggests stronger-thanexpected sales activity during the month and points to a modestly improved contribution from brokers’ commissions, a component of residential investment, to GDP growth. Thus, after rounding, we revised up our Q2 real GDP tracking estimate by 0.1pp to 4.2% q-o-q saar.”