Economic Reports to Show a Rebound

Housing is continuing to support growth, and the nation’s factories are increasing production, evidence that economic growth is rebounding, reports this week are expected to show.

“The economy is looking solid,” said James O’Sullivan, an economist at UBS Warburg in Stamford, Conn. “It’s not booming, but it’s not terribly weak either.”

The expected housing and factory figures would offer fresh evidence that economic growth this quarter is gaining momentum. Reports last week showed manufacturing production in January had the biggest increase in a year, and retail sales excluding autos rose the most in two years. Economists said the pace of expansion this quarter may be four times as high as the 0.7% annual rate in the final three months last year.

A report from the Commerce Department on Wednesday will probably show that builders broke ground on new homes at an annual rate of 1.78 million in January, compared with a total of 1.71 million last year, based on the median of 46 estimates in a Bloomberg News survey of economists. In 2002, starts were the strongest since 1986.

Colder-than-average temperatures last month caused home building to slow from a 1.84 million pace in December, the highest in 16 years.

Indexes measuring manufacturing in New York state and the area surrounding Philadelphia are expected to show that activity in both regions expanded for the fourth straight month, suggesting that production in the nation is strengthening.

Factories in New York state followed a surge in January with further expansion this month, economists said they expect the Buffalo, N.Y., branch of the New York Federal Reserve Bank to report Tuesday.

“Clearly, manufacturing is holding in pretty well,” UBS Warburg’s O’Sullivan said. “The big question, of course, is what happens next with the geopolitical concerns. The economy is looking fairly strong right now, so if these issues are resolved quickly, it could do reasonably well in the second half of the year.”

The prospect of war with Iraq pushed crude oil prices to a 29-month high last week. The steeper costs are starting to show up in price indexes. At the wholesale level, producer prices probably rose 0.4% in January, the biggest gain in three months, after holding steady the previous month, economists said they expect the Labor Department to report Thursday.

Excluding food and energy, the index probably rose 0.1% for the month after falling 0.3% in December, the economists survey found.

Rising gasoline and home-heating costs probably also pushed consumer prices higher last month, economists said they expect the Labor Department to report Friday. The consumer price index probably gained 0.3% last month, three times the 0.1% increase in December. Core prices are expected to rise 0.2% after climbing 0.1%.

Other reports to watch this week:

* Wednesday, Wal-Mart Stores Inc. to report fourth-quarter results.

* Thursday, Commerce Department to report on international trade in December .

Conference Board, a New York research group, will report on January’s leading economic indicators.