Strong Economic Data Points to Recovery
By REUTERS
Filed at 12:04 p.m. ET
WASHINGTON (Reuters) - Americans bought newly built homes and expensive manufactured goods at a brisk pace in July and a report on August consumer confidence was surprisingly strong, indicating the U.S. economic recovery is on course.
In a report issued on Tuesday, the government said sales of new homes dipped slightly last month. But the total was still ahead of expectations because June's record high sales pace was revised upward.
While down 2.9 percent from June, July new home sales were still at the second-highest level ever.
In other encouraging reports, the Commerce Department said durable goods orders rose 0.9 percent in July and the Conference Board said its consumer confidence index rose to 81.3 in August from an upwardly revised 77 in July. But the confidence survey also suggested job-seekers are still having a tough time finding work.
``The general conclusion that I would draw is that the recovery is gaining momentum but a large proportion of the population are still waiting for some more proof,'' said Mark Vitner, economist at Wachovia Securities.
Demand for cars led the rise in durable goods orders, but there were increases across the board. Orders of motor vehicles and parts surged 5.5 percent and machinery orders climbed 1.8 percent, while demand for computers and electronics rose 1.9 percent.
Excluding transportation, orders rose 1.7 percent, and without spending on defense, orders were up 1.4 percent.
``Overall, it's a healthy report, and I think it continues the very upbeat picture that has been painted now for a couple of months, that manufacturing is finally coming out of its slump,'' said Mike Niemira, senior economist at Bank of Tokyo-Mitsubishi.
The home sales report showed that even as the U.S. housing boom begins to slow as mortgage interest rates rise from 40-year lows, house-buying remains attractive.
Sales of new single-family homes slipped to a seasonally adjusted 1.165 million annual rate -- the second-highest pace on record.
``The housing market remains strong and one piece of data that jumps out is that inventories of unsold homes are very, very low, suggesting that even through the end of the year, you're going to see continued construction strength,'' said Mickey Levy, chief economist at Banc of America Securities LLC.
Inventories equaled June's record low of 3.5 months' supply of homes available for sale at the current sales pace.
In another good sign for the economy, consumers said they were feeling more optimistic in August about the future. The Conference Board's confidence index showed the expectations component jumped to 94.4 from 86.3 over the last month.
But pointing to the current conditions index, which dipped to 61.6 from 63.0, analysts offered a word of caution about the report.
``The consumer number isn't really as good as it looks,'' said Drew Matus, economist at Lehman Brothers.
``The simple fact of the matter is the labor market is still holding back people's confidence, and in the long run will probably hold back people's willingness to spend additional money.''
Meanwhile, on the fiscal front, the Congressional Budget Office forecast a federal budget deficit of $480 billion in 2004, a record shortfall that some economists say could push up interest rates as the government's borrowing needs balloon. |
