indicators point to us economic growth

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    Several Indicators Point to Brisk Economic Growth

    By VIKAS BAJAJ - NYTimes
    Published: July 28, 2005

    Sales of new homes and orders for durable goods rose faster than expected last month, the government reported yesterday, providing more indications that the economy is expanding at a brisk pace.

    Orders for durable goods, products that are expected to last for three years or more, like these lawn tractors outside a Lowe's store in Milwaukie, Ore., were up 1.4 percent in June.
    Separately, the Federal Reserve said that the economic expansion had picked up steam and that inflation remained at bay in June and early July.

    The central bank's beige book, a periodic survey on economic conditions, noted broad strength in housing, manufacturing, tourism, consumer spending and banking.

    New-home sales rose by 4 percent, to an annualized rate of 1.37 million in June, breaking a record set the month before, according to the Commerce Department. The latest figures come after a report earlier in the week that showed sales of existing homes also hit a record in June.

    Economists were expecting 1.3 million new homes to be sold in June.

    Another report released yesterday indicated that home sales would probably continue at the current pace but were unlikely to set records. An index that gauges mortgage applications for home purchases and refinancings fell 5.8 percent for the week ending last Friday, according to the Mortgage Bankers Association. Most of the decline was in refinancings.

    "The housing numbers are not surprising with mortgage rates as low as they are," said Anthony Chan, senior economist at JPMorgan Asset Management. "But low interest rates won't last forever."

    Mortgage rates, which for many Americans are the biggest factor in home purchase decisions, have inched up a little in recent weeks but remain at historic lows.

    The 30-year fixed mortgage rate averaged 5.73 percent last week, down from 5.98 percent this time last year but up from 5.66 percent earlier this month, according to Freddie Mac.

    According to the Federal Reserve's survey, home sales remain strong nationally, but price and sales growth eased a bit in June and early July in some of the hottest markets, including New York, Washington, Florida and California.

    The scene on the nation's factory floors was also vibrant. The Commerce Department reported yesterday that orders for durable goods, products expected to last three or more years, were up 1.4 percent in June after posting a 6.4 percent gain in May.

    The increase beat economists' expectations of a 1 percent decline and came in spite of falling orders for aircraft and other transportation equipment, which make up a sizable and volatile part of the data. Excluding transportation, orders increased 2.6 percent.

    Economists were particularly heartened to see a 3.8 percent increase in orders for big-ticket capital goods excluding transportation and military equipment. That means businesses are gaining enough confidence in the economic expansion to purchase equipment. Orders for computers and electronic equipment climbed 8.6 percent in June after a 1.5 percent gain in May.

    "Businesses are going to start ramping up investment spending a little stronger than they did in the first quarter," said David Huether, chief economist at the National Association of Manufacturers in Washington.

    The Federal Reserve described manufacturing as "generally upbeat," but it said job growth in the sector was still sluggish. In spite of rising prices for energy and building materials, the Federal Reserve said consumer and wholesale prices either fell slightly or remained unchanged across most of the country.

    Some of the growth in manufacturing appears tied to the housing boom. The Federal Reserve noted strong growth for producers of cement and other construction materials. Mr. Chan of JPMorgan said the increased durable goods orders might be tied partly to home buying. "We want to buy new electronics for those new houses," he said.

    On Friday, the government will release its first estimate of the nation's gross domestic product in the second quarter. Economists on average expect the G.D.P. to rise at a 3.5 percent annual rate after a 3.8 percent increase in the first quarter.

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