WRAPUP 1-U.S. durable goods orders drop, home sales rise

* New orders for U.S.-made durable goods unexpectedly drop

* New home sales hit 11-month high; rise is below forecast

* Consumer sentiment in September highest since Jan 2008

WASHINGTON, Sept 25 - New orders for long-lasting U.S. manufactured goods fell in August and sales of new homes rose below expectations, according to government data on Friday that fanned fears that recovery from recession would be tepid.

The reports from the Commerce Department overshadowed a jump in consumer confidence index this month to its highest since January last year. For more see [ID:nN25390248].

The Commerce Department said durable goods orders tumbled 2.4 percent, the largest decline since January, after rising 4.8 percent in July. That was well below market expectations for a 0.5 percent rise in August.

In another report the department said sales of newly built single-family homes rose 0.7 percent in August for a fifth straight month to a 429,000 unit annual pace, the highest since September last year. However, the increase was below market expectations for a 440,000 unit rate.

U.S. stocks fell on the data, which, coming on the heels of a report on Thursday that showed a surprise drop in existing home sales in August, serving as a reminder that recovery from the worst recession since the 1930s would be uneven.

Government bond prices rose on the news.

"The durables report is a bump in the road for the U.S. recovery story. We still expect a relatively positive trend for the economy, although we shouldn't get too excited," said Sebastien Galy, senior currency strategist at BNP Paribas in New York.

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

Doubts linger over the sustainability of the recovery that economists say is already under way as consumer spending remains constrained by a weak labor market.

Non-defense aircraft and new parts orders plunged 42.2 percent in August, likely reflecting a drop in civilian aircraft orders received by Boeing <BA.N>. New orders for transportation equipment dropped 9.3 percent.

New durable goods orders excluding transportation were flat in August, after rising for three straight months, the department said. Analysts polled by Reuters had expected new orders, excluding transportation, to rise 1.0 percent, after a 1.1 percent increase in July.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending, unexpectedly fell 0.4 percent in August. Analysts polled by Reuters had expected core capital goods to increase 1.3 percent.

The prior month was revised to show a 1.3 percent drop, previously reported as a 0.3 percent fall.

Durable goods inventories fell 1.3 percent in August after dropping 1.1 percent the prior month and declining for eight consecutive months. Shipments fell 1.4 percent after two months of straight gains. Shipments rose 2.2 percent in July.

Separately, total new homes sales fell 3.4 percent compared to August last year.

The median home sales price in August fell 11.7 percent from a year earlier to $195,200, the lowest since October 2003, the Commerce Department said. In July, the median home price was $215,600.

The inventory of new homes available for sale at the end of August fell 3.0 percent to 262,000 units, the lowest since November 1992. August's sales pace left the supply of new homes available for sale at 7.3 months, the lowest since January 2007.