Homes sales climb; orders for many big-ticket items up; consumer confidence rebounds
Friday, December 28th 2001, 12:00 am
By: News On 6
WASHINGTON (AP) _ Home sales climbed, orders for many big-ticket items posted gains and consumer confidence rebounded, the latest batch of economic data showed Friday. The reports raised hope that better days may be ahead for the ailing economy.
New-homes sales soared by 6.4 percent in November, the largest increase in almost a year, helped out by mild weather and low mortgage rates, the Commerce Department reported.
Sales of previously owned homes rose by 0.6 percent in November to a rate of 5.21 million, setting the stage for a possible record year, the National Association of Realtors said in another report.
Although a big drop in demand for military planes pushed down orders for costly manufactured goods last month by 4.8 percent, many other big-ticket items posted gains, another Commerce Department report showed.
But in the most encouraging economic news of the day, consumer confidence rose sharply in December following three months of dramatic decline, as the erosion of the economy and job market appeared to begin leveling off.
The New York-based Conference Board said its Consumer Confidence Index rose to 93.7 this month from a revised 84.9 in November. Analysts were expecting a reading of 83.
The index, based on a monthly survey of some 5,000 U.S. households, is closely watched because consumer confidence drives consumer spending, which accounts for about two-thirds of the nation's economic activity.
All three reports raised hopes that the recession, which started in March, may be bottoming out.
Virtually all of the weakness in orders for durable goods _ items expected to last at least three years _ in November came from a 57.9 percent drop in new orders for airplanes, mostly stemming from slackened demand for defense aircraft and parts, the government said.
That masked gains elsewhere.
Excluding the volatile transportation category, which can swing widely from month to month, durable-goods orders rose a solid 1.1 percent, the first back-to-back increase since November-December 1999.
New orders for automobiles rose a strong 4.5 percent in November, on top of an 11 percent increase in October. Free financing for cars and trucks has been a main factor behind stronger sales in the last couple of months.
Orders for computers and electronic equipment grew by 2 percent, following an 8.9 percent advance in October.
Electrical equipment and household appliances saw orders increase by 2.6 percent in November, after a 4.5 percent gain. Orders for primary metals, including steels, rose 1.4 percent, following a 2 percent decline.
The nation's manufacturing sector has been hardest hit by the sour economy, which tipped into recession in March. To cope, factories have sharply cut production and laid off workers.
In the new-home sales report, the 6.4 percent rise, the biggest increase since December 2000, pushed new-home sales to a seasonally adjusted annual rate of 934,000, the highest level in eight months.
By region, new-home sales rose by 6.1 percent in the Northeast to a rate of 70,000. In the Midwest they jumped by 13.1 percent to a rate of 173,000 and in the South, they grew by 7.7 percent to a rate of 478,000. But in the West, sales fell by 0.9 percent to a rate of 213,000.
For previously owned homes, sales rose by 3.8 percent in the West in November to a rate of 1.36 million. Sales held steady at a rate of 1.17 million in the Midwest and 2.05 million in the South. But in the Northeast, sales fell by 3.1 percent to a rate of 630,000.
Economists say mild weather and low mortgage rates helped both new and existing home sales last month. The average interest rate on a 30-year fixed rate mortgage was 6.7 percent in November, compared with 7.7 percent for the same month a year ago.
The Federal Reserve, in an effort to revive the economy, has cut interest rates 11 times this year. The Fed hopes that the reductions _ which pushed borrowing costs to their lowest level since November 1965 _ will induce consumers to spend and businesses to invest.
Many economists project the Fed's aggressive action will help bring about an economic recovery by the spring.
In another report, new claims for unemployment insurance rose last week by a seasonally adjusted 7,000 to 392,000, the Labor Department reported.
The smaller-than-expected rise may have been affected by an upcoming policy change in California, where residents are to receive an increase in unemployment benefits early next year. That may have prompted some laid-off workers to delay filing new claims, a government analyst said.