Washington – Orders to U.S. factories for big-ticket manufactured goods shot up 1.9 percent last month while sales of new homes hit an all-time high as the economy demonstrated further evidence of a strong rebound in April.
The Commerce Department said the increase in demand for durable goods, items expected to last at least three years, was the best showing in five months. Orders rose by $3.71 billion to a seasonally adjusted $200.3 billion last month, reflecting strength in autos and aircraft.
In a second report today, the department said sales of new single-family homes rose by 0.2 percent to a record annual rate of 1.316 million units in April, up from a revised March level of 1.313 million units, which had also been a record.
The strong demand for new homes pushed up the median price to a record, as well, of $230,800. That was up 6.1 percent from the March median price of $217,500. The median is the midpoint at which half the homes sold for more and half for less.
The strength in home sales last month was led by a 37.2 percent surge in the Northeast, which pushed the sales rate to 107,000 homes, the strongest pace since January 1997. Sales were also up 2.8 percent in the Midwest to an annual rate of 368,000 units.
However, sales fell by 5.3 percent in the South to an annual rate of 630,000 units and were down 0.5 percent in the Midwest to an annual rate of 211,000 units.
The strength in new home sales followed a report Tuesday that sales and prices of existing homes also set records in April. Some analysts have begun to worry that the soaring housing market could be heading for a tumble, especially in the hottest sales areas of the country.
In a speech last week, Federal Reserve Chairman Alan Greenspan said he did not believe there was a national housing bubble, similar to the stock market bubble that burst in early 2000. But he said there were a “lot of local bubbles.”
Both the increase in new home sales and durable goods orders in April were better than analysts had been expecting and provided further evidence that an economic slowdown in March would likely be short-lived.
The 1.9 percent jump in durable goods orders, the largest advance since a 2 percent increase last November, followed three straight monthly declines including a sharp 1.6 percent drop in March. That decline had raised worries that the economy could be faltering as consumer and business confidence were jolted by higher energy bills.
But several stronger-than-expected reports of April activity have eased fears of a prolonged slowdown.
The government will release a revised report on economic growth in the January-March quarter on Thursday, and many analysts expect the rate of increase in the gross domestic product will be revised upward to a healthier 3.6 percent rate from the originally reported 3.1 percent GDP growth rate, which had been the slowest pace in two years.
The jump in April orders provides hope that the economy will continue on a solid growth path in the months ahead. Leading the advance was an 8.2 percent surge in orders for transportation equipment, the biggest increase since last November.
Demand for motor vehicles and parts rose by 3.4 percent while orders for commercial aircraft were up 28.2 percent and demand for military aircraft rose by 26.3 percent.
Excluding transportation, orders would have edged down a slight 0.2 percent in April.
Demand for computers and other electronic products fell by 5.8 percent after having posted a 4.7 percent gain in March while orders for communications equipment were off an even larger 18.8 percent, reversing a 10.3 percent jump in March.
Orders for non-defense capital goods, viewed as an indicator of business plans to expand and modernize, rose by 3.8 percent in April, the best showing since a 7.7 percent surge last November.
Orders for business capital goods had been weak in the first three months of this year, reflecting the expiration at the end of last year of popular tax deductions which had been designed to encourage sales of business equipment as the country struggled to emerge from the 2001 recession.
Businesses, rushing to take advantage of the expiring tax breaks, had pushed up total durable goods orders by 1.5 percent in December and 2 percent in November.
