Increased Home Sales, Spending Spark Optimism : Economy: Some analysts see the increase in activity as an encouraging sign of recovery.

The beleaguered economy in March finally showed some encouraging signs as sales of new single-family homes increased 1% to a seasonally adjusted annual rate of 490,000 units and consumers increased their spending by 0.6%, the government reported Monday.

“I think the numbers are consistent with the view that the economy is bottoming out and that a recovery is coming,” said Richard Peach, deputy chief economist for the Mortgage Bankers Assn. in Washington.

The improvement appeared to stem, however, from strapped consumers dipping into their savings to maintain lifestyles that have been squeezed by sluggish income growth, experts said.

The savings rate, which reflects savings as a percentage of after-tax income, fell to 3.7% in March from 4.1% the previous month. Meanwhile, Americans’ earnings from wages, rent and investments went up just 0.2% in March and February, although farm income in March rose a robust 14.4% after increasing 19.2% in February, the Commerce Department said.

Home purchases and consumer spending patterns are closely watched as indicators of the economy’s direction. Consumers account for about two-thirds of U.S. economic activity through their purchases of goods and services. But few analysts forecast a major stimulus from consumer spending in the next few months because unemployment is increasing and incomes aren’t growing briskly.

“Consumers are burdened with debt and income growth is very weak,” said Cynthia Latta, senior financial economist for DRI/McGraw Hill in Lexington, Mass. “There’s a potential for more layoffs. . . . We are still not looking for a vigorous economic recovery.”

The stock market, another widely watched indicator of U.S. economic performance, appeared to echo the caution of Latta on Monday as an afternoon round of stock selling by investors drove the Dow Jones industrial average down 35.40 to close at 2,876.98.

Still, housing analysts were heartened by the March figures, even though the improvement in home sales was entirely because of an increase in the West, where homes sales rose to a seasonally adjusted 155,000 units, compared to 127,000 in February.

Experts said the March rise, although tiny, suggests that February’s huge double-digit increase was the beginning of an industry recovery rather than an aberration.

“I think we’ve certainly turned the corner on housing,” said David W. Berson, chief economist at the Federal National Mortgage Assn., who had forecast a 1.5% rise in March sales.

Berson said he was also encouraged that housing sales in the Midwest--which dipped to 90,000 from 106,000--held up in the wake of abnormally high sales activity in February, when home purchases were aided by mild weather.

New Home Sales Sesasonally adjusted annual rate, thousands of units March, ‘90: 559 Feb. ‘91: 485 March, ‘91: 490 Source: Commerce Department