Reports Due on Housing Starts, Manufacturing
Home construction held near the highest level in almost 18 years last month and the production of consumer goods and business equipment accelerated, government and industry statistics are forecast to show this week.
An estimated annual rate of 1.92 million homes probably were started in November compared with 1.96 million a month earlier, according to the median forecast in a Bloomberg News survey ahead of Tuesday’s release from the Commerce Department.
Production at the nation’s factories, mines and utilities may have risen 0.5% after October’s 0.2% increase, a Federal Reserve report is forecast to show the same day.
Tax cuts won by President Bush and a 45-year low in the Fed’s benchmark interest rate are opening the way for growth next year that may be the strongest since 1999. Economists at Goldman Sachs & Co. on Friday raised their first-half 2004 forecast to an annual rate of 4% from 3.25%.
“It’s pretty hard not to have a strong economic recovery next year,” George David, chief executive of United Technologies Corp., told investors last week. United Technologies is the world’s No. 1 maker of elevators and air conditioners through its Otis and Carrier units.
Fed policymakers suggested last week that they could keep their benchmark overnight bank lending rate at 1% “for a considerable period” because inflation was tame and the labor market had enough slack.
Economists forecast the nation’s growth to average 4.4% for all of 2004, which would make that the best year since 1999, according to a Bloomberg survey of economists Nov. 25 to Dec. 4.
“The tax reduction in 2004 will be $140 billion to $150 billion,” said Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis. “Fiscal policy remains highly stimulative. In addition, monetary policy is very accommodative.”
Tuesday will be the busiest day of the week for economic statistics. Besides housing starts and industrial production, data will be released on consumer prices and the third-quarter current account deficit.
Housing starts in October were the strongest since January 1986. Home sales and consumer spending were the linchpins for the economy when growth slowed at the end of 2002 and the first three months of this year. The continued strength of home sales has left builders with higher backlogs, suggesting that they will have plenty of work to do through much of next year.
The average 30-year fixed mortgage rate is less than a percentage point higher than the record low 5.21% reached in June, according to Freddie Mac, the No. 2 buyer of mortgages. The effect on sales has been minimal. D.R. Horton Inc., the second-largest home builder by stock market value, said Thursday that its October and November orders “continued to show year-over-year double-digit percentage increases each month,” according to a press release.
Manufacturing continues to expand, three separate reports are forecast to show. Besides the expected increase in industrial production, a report today from the Fed Bank of New York is expected to show that manufacturing in that state grew this month for an eighth straight month. The index may register 35 during the month after jumping to 41 in November, the highest on record for the survey. Values greater than zero signal that a majority of factories said business improved.
Fed policymakers have been able to hold the line on interest rates even as the economy strengthens because inflation is tame. A report from the Labor Department on Tuesday is forecast to show that consumer prices rose 0.1% in November after rising 0.2% in October.
Other key economic reports scheduled for the week:
Tuesday
* The Commerce Department may report that the third-quarter current account deficit narrowed to $136 billion from $138.7 billion.
Thursday
* The Labor Department is forecast to report initial jobless claims of 365,000 in the week ended Saturday, compared with 378,000 the prior week.
* The Conference Board may report a 0.3% increase in the index of leading economic indicators after a 0.4% rise.
From Bloomberg News
