- The Washington Times - Wednesday, May 25, 2005

ASSOCIATED PRESS

Orders to U.S. factories for big-ticket manufactured goods rose 1.9 percent last month, the best showing since November, and sales of new homes hit an all-time high.

The reports provided further evidence that the economy has recovered from its March slowdown.

The Commerce Department said the increase for durable goods was propelled by strong demand for transportation equipment, especially airplanes, which helped push the overall number up by $3.71 billion to a seasonally adjusted $200.3 billion. Excluding transportation, orders would have edged down a slight 0.2 percent.

In a second report, the Commerce Department said sales of new houses, which were already at a record level in March, inched even higher in April, rising 0.2 percent to a new record annual rate of 1.316 million units. The median price of a new home jumped 6.1 percent to a new high of $230,800.

Economists said the strength in both reports showed that worries of a serious slowdown from this year’s oil shock were overblown.

“In March, we had a combination of bad weather and bad seasonal adjustment problems which made that month look too weak,” said David Wyss, chief economist at Standard & Poor’s in New York.

He said that based on the data so far, economic growth for the first three months of the year will probably be revised up in a government report today to about 3.5 percent, compared with the originally reported 3.1 percent growth. Mr. Wyss also said that based on the strength already seen in April, he will increase his estimate for second-quarter growth as well.

“It looks like we will get around 3.5 percent growth for the first half of this year, which is pretty darn good,” he said.

The strong report on new-home sales followed a report Tuesday showing that sales of existing homes shot up 4.5 percent in April to a high annual rate of 7.18 million units. The median price of an existing home sold last month hit a record as well — of $206,000, up 15.1 percent from a year ago, the biggest price jump in nearly a quarter century.

The big increase in prices of both new and existing houses has raised concern among some economists that the housing industry could be in the grips of the same type of speculative fever that pushed Internet stock prices up to dizzying heights in the past decade, only to see them come crashing back to earth when the bubble burst in early 2000.

Sales rose in two of the four regions in April. Sales surged 37.2 percent in the Northeast to 107,000 and rose 2.8 percent in the West to 368,000. They fell 5.3 percent in the South to 630,000 and declined 0.5 percent in the Midwest to 211,000.

The 1.9 percent jump in durable-goods orders, the largest advance since a 2 percent increase last November, followed three straight months of declines including a sharp 1.6 percent drop in March.

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