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Reports Signal Vigorous Economy : Indicators: Sales of new homes climb 3.3% in September. Employment costs and manufacturing also make good showings.

From Times Wire Services

Fresh signs of economic vitality without inflation appeared Tuesday as the government reported the second-highest new home sales of the year and the smallest employment cost increase on record.

Two private reports appeared to confirm a vigorous economy, with one reporting an expanding manufacturing sector and the other strong consumer confidence.

“Without inflation, the economy is encountering no real impediments and can continue on its present growth path indefinitely,” said economist Eugene Sherman of M.A. Schapiro & Co. in New York.

The reports “show solid growth without inflation and that consumers are feeling pretty good about it,” said economist David F. Seiders of the National Assn. of Home Builders.

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The government had reported Friday that the economy grew at a 4.2% annual rate during July, August and September, about three times the pace of the previous three months.

The Commerce Department said Tuesday that sales of new homes rose 3.3% in September, to 727,000 at a seasonally adjusted annual rate, from 704,000 in August.

The total was second in 1995 only to the 792,000 rate in July. It marked the first time in nearly two years that sales topped 700,000 for four straight months.

The housing industry went into a slump earlier this year after mortgage rates topped 9%. But it has rebounded recently; rates had dropped to 7.5% as of last week. (That would mean a savings of more than $100 a month on a $100,000 mortgage.)

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But most analysts expect sales to level off for the remainder of the year, and the regional sales mix appeared to suggest such a plateau. Sales were up in the Midwest and West but fell in the Northeast and South.

Still, observers noted that sales remained at relatively high levels.

In a second report, the Labor Department said U.S. workers’ wages, salaries and benefits rose 2.7% in the year ended Sept. 30, the tiniest increase since it began tracking compensation in 1981.

The employment cost index is considered one of the best gauges of wage inflation pressures because compensation represents about two-thirds of a product’s cost.

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Meanwhile, the Chicago Purchasing Management Assn.'s index of business activity rose to 53.4 this month, up from 49.0 in September. A reading above 50 denotes expansion in the manufacturing sector.

Many analysts see the Chicago index as a preview of the national manufacturing survey that comes out today.

Although the Conference Board’s measure of consumer confidence fell marginally in October, it remained at a level depicting healthy economic growth. The New York business research group said its index was 97 this month, down from 97.3 in September.

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New Home Sales

Seasonally adjusted annual rate, in thousands of units:

Sept. 1995: 727

Source: Commerce Department

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