Economy - Thursday

OFHEO: Home price gains slump

Q2 prices rose 3.2% vs. a year ago, the slowest rise in a decade, the Office of Federal Housing Enterprise Oversight said. Price gains could turn into declines, as they have in other measures, and are taking a toll on broader economic growth. The S&P/Case-Shiller index on Tue. showed Q2 home prices down 3.2% vs. a year earlier. OFHEO prices don't include homes with jumbo or subprime loans, two of the more vulnerable segments of the mortgage market. Weakness is expected to continue into '08.

Mortgage rates fall to 3-mo. lows

Freddie Mac said average rates on 30-year mortgages fell to 6.45% from 6.52%. The 15-year rate slid to 6.12% from 6.18%. Demand for traditional mortgages appears to be returning. But 1-year ARMs jumped to 5.85% from 5.6% on weaker demand and following a host of short-term securities that spiked last week due to market uncertainties.

Fed discount window borrowing was $1.1 bil on Wed., averaging $1.3 bil for the week, the Fed said. The weekly data showed little or no new borrowing. The Kansas City Fed's regional factory index rose to 15 in Aug. from 10 in July. Shipments and new orders surged as well. Hedge funds were behind 30% of U.S. trading volumes in debt markets last year, double the year prior, a survey by Greenwich Associates said. BoE extends emergency credit

The Bank of England supplied $3.2 bil at 6.75% to spur borrowing as banks continue to worry over the sickly U.S. subprime mortgage market. It's the largest liquidity infusion since July 2, when the central bank lent billions to Barclays after a delayed loan from HSBC. The bank did not name borrowers this time.

Japanese retail sales fell 2.2% in July vs. a year ago as higher taxes and bad weather hurt demand, its Trade Ministry said. COMING UP FRIDAY

Personal income and spending for July, 8:30 a.m. EDT (forecast: income up 0.3%, spending up 0.3%, core PCE deflator up 0.2%). Factory orders for July, 10 a.m. EDT (forecast: 3%). Fed Chairman Ben Bernanke speaks on housing and monetary policy, 10 a.m. EDT.