Home Sales, Consumer Spending Show Stamina
Sales of existing homes stayed close to a record high in August and consumer spending picked up speed last month, signs of the U.S. economy’s stamina as investors await a possible cut in interest rates by Federal Reserve Board policymakers next week.
“Americans are a bunch of happy campers,” said Joel Naroff, chief bank economist at First Union Corp. in Philadelphia. “At least right now, we’re not seeing much impact from Asia. There’s no doubt that people are spending money--they’ve got it, they’re spending it.”
While U.S. home resales fell 3.7% in August to an annual rate of 4.73 million, it wasn’t much of a falloff from the previous month’s record sales rate of 4.91 million, figures from the National Assn. of Realtors showed. Sales in July advanced 3.6% from June.
In California, sales of existing single-family homes rose 9.7%, totaling 636,180 on a seasonally adjusted, annualized basis, according to the California Assn. of Realtors. But August sales were 6.2% down from July as the real estate market--particularly in Northern California--moderated.
The median price of an existing California home in August fell 0.8%, to $209,890, from July, but remained 9.4% above August 1997. For the Los Angeles area, the median sales price in August was up 10.7%, to $201,090, from the same month last year.
Separately, the Commerce Department said personal spending rose 0.6% last month after falling 0.1% in July. Americans’ incomes also rose 0.5% in August, following a 0.4% July gain.
The reports suggest the economy has inner strength in the eighth year of the current expansion. Fed policymakers, though, expect a slowdown later this year as the economy feels the effects of the recession in Japan and the slowdown elsewhere in Asia and other parts of the world.
Comments this week from Federal Reserve Board Chairman Alan Greenspan led investors to expect a cut in the Fed’s target federal funds interest rate on overnight loans between banks from the current level of 5.50%. The Fed’s policymaking Open Market Committee meets Tuesday, and if it acts as expected, it would mark the first interest rate cut in 32 months and the first policy change since the fed funds rate was raised in March 1997.
Meanwhile Friday, New York Federal Reserve Bank President William McDonough said he expects the U.S. economy to grow at a 2% to 2.5% annual rate in the second half of this year and all of next year. That’s well below the 3.7% growth rate for the first half of 1998.
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Personal Income
Seasonally adjusted annual rate, in trillions of dollars:
August: $7.17 trillion
Source: Commerce Department
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Personal Spending
Seasonally adjusted annual rate, in trillions of dollars:
August: $5.84 trillion
Source: Commerce Department
