Home Sales, Product Orders Point to Growth
Record sales of existing homes and surging demand for semiconductors and other electronic components in August paint a picture of an economy that continues to expand robustly.
Meanwhile, 2,000 fewer Americans filed applications for jobless benefits last week, suggesting the nation’s jobless rate remained near a 24-year low this month.
“The economy is still growing at a very strong pace,” said economist Michael Strauss of Sanwa Securities in New York.
Sales of previously owned homes jumped 3.3% to a seasonally adjusted annual rate of 4.32 million in August, the National Assn. of Realtors said Thursday.
It was the highest level since the group began tracking sales in 1968 and beat the old record of a 4.28 million rate in May 1996. Regionally, sales rose in the West, South and Midwest but fell in the Northeast.
The California housing market generated an impressive performance. The pace of homes sales in August rose 4.6% from the previous month to 587,860 properties on a seasonally adjusted, annualized basis, according to the California Assn. of Realtors. The median sales price in August was $194,390, up about 1% from July and nearly 8% above the same month last year.
“Things are heating up,” said G.U. Krueger, deputy chief economist for the real estate association. The gains in sales and prices are “above expectations.”
Orders to U.S. factories for durable goods--items expected to last three or more years--increased 2.7% to a record seasonally adjusted $186.6 billion in August, the Commerce Department said.
The rise was powered by a 28.4% jump in electrical equipment, the most since the government began keeping track in 1958. The bulk of the advance came in electronic components such as semiconductors and circuit boards.
Separately, the Labor Department said new applications for unemployment benefits totaled 306,000 last week, the lowest level in seven weeks and down from 308,000 the previous week.
The total number of workers receiving benefits, 2.22 million, hit an eight-year low the previous week. Strauss said that suggests the nation’s unemployment rate, 4.9% in August, fell to 4.8% or 4.7% this month. That figure is due out at the end of next week.
All three reports depicted greater economic strength than analysts predicted. They upset the inflation-sensitive bond market. The stock market, at first relatively unscathed, fell too.
The Dow Jones average of 30 industrial stocks dropped 58.70 points to 7,848.01. The yield on 30-year Treasury bonds jumped sharply to 6.40% from 6.31%.
Traders worry that too much strength will prompt the Federal Reserve Board to nudge short-term interest rates higher to head off any inflationary pressures resulting from the growth.
But economists said the Fed would probably refrain from raising rates at its next meeting, on Tuesday, because inflation has actually declined this year, even with the brisk economic growth.
John Tuccillo, economist for the National Assn. of Realtors, said low mortgage rates and plentiful jobs are drawing buyers into the housing market. He predicted home sales this year would inch past last year’s 18-year high of 4.19 million.
The average rate on 30-year, fixed-rate mortgages fell to a 19-month low of 7.28% this week. Nationally, the median price of an existing home--meaning half sold for more and half for less--was $127,500 in August, up 4.3% from a year earlier.
The August increase in durable-goods orders, the third in a row, followed gains of 0.1% in July and 2.9% in June.
Other than electrical equipment, the only other category to show substantial strength was transportation equipment, up 5.2%.
A large increase for aircraft offset declines in other areas. Orders for primary metals such as steel and for industrial machinery fell.
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Existing-Home Sales
Seasonally adjusted annual rate, in millions of units:
Aug.1997: 4.32
Source: National Assn. of Realtors
