KC: as you are one of the least myopic bears in these parts, you are better oriented to see the implications of this:
biz.yahoo.com
Reuters
U.S. Data Underscore Fast Economic Growth
Friday October 17, 11:51 am ET
By Eric Burroughs
NEW YORK (Reuters) - Consumer sentiment rebounded in early October while U.S. home builders accelerated new construction in September to a near 17-year high, according to two reports that added to this week's evidence of fast-paced economic growth.
Other data this week have revealed that while consumer spending eased in September, spending was far stronger in August and July than originally estimated. That means gross domestic product in the third quarter could have been as high as 7 percent -- the best since the end of the late-1990s boom.
The University of Michigan said its preliminary gauge of consumer sentiment rose to 89.4 from a final reading of 87.7 the prior month, beating forecasts.
"It shows that consumers are sensing some good news on the job front and the income front," said Kurt Karl, head of research at Swiss Re in New York.
A separate report from the U.S. Commerce Department showed ground-breaking for new homes jumped 3.4 percent to a seasonally adjusted annual rate of 1.888 million units in the month, beating expectations and up from an upwardly revised 1.826 million pace in August.
Taken together, the news this week has had many economists upwardly revising forecasts for growth and employment next year. Federal Reserve officials have also expressed optimism that the hearty pace of expansion will lead to healthy hiring soon.
While some companies are laying off employees to keep costs under control, jobless claims have steadied and there are some signs that hiring is gradually returning. On Wednesday International Business Machines (NYSE:IBM - News) said it plans to hire 10,000 workers next year as more customers hike spending on technology.
"Significant hiring by businesses will be the final confirmation that sustained economic growth is here to stay," said Wells Fargo chief economist Sung Won Sohn, who is predicting 7 percent third-quarter growth.
The still very low pace of inflation suggests the Fed will not be quick to raise its 1 percent target rate for inter-bank lending in coming months. But markets are now anticipating the central bank may push up that rate by May or June next year.
The breakdown of the University of Michigan survey was also positive, with the index of current conditions rising sharply to 102.2 from 98.4. The expectations index edged up to 81.2 from 80.2 the previous month.
While confidence measures are often watched for signs of where consumer spending is headed, it was the first increase in sentiment since July -- even as spending has soared in the past few months, primarily thanks to tax cuts.
SENTIMENT AND STARTS BOTH UP
Low interest rates also have kept the housing market booming, even as they have risen from their historic mid-summer lows. During September, mortgage rates fell by half a percentage point, though that move has reversed in recent weeks on the upbeat economic news.
September housing starts came in close to July's 17-year high and rose in all regions of the country except the South, where they fell 1.3 percent. In the Midwest starts jumped to the highest rate since November 1978.
Though permits fell 2.2 percent to a seasonally adjusted annual rate of 1.86 million units, they still remain high and homebuilder confidence has continued to rise in recent months despite higher rates.
Home builders' optimism jumped in October to its highest level in almost four years on the expectation that an improved economy would support home sales.
"Starts have weathered a fairly sharp rise in long-term interest rates remarkably well," said Chris Low, chief economist at FTN Financial, in a research note.
(With additional reporting by Mark Felsenthal and Pedro Nicolaci da Costa) |
