The nation's economy displayed resilience in September despite two devastating hurricanes and surging energy costs, economic reports released yesterday show.þþNew-home construction picked up speed in September and permits for new building jumped, the Commerce Department reported yesterday, indicating that rising interest rates and concerns about inflation have not yet slowed the new housing market. A separate report said mortgage applications for home purchases rose last week.þþAnd a Federal Reserve survey of the national economy, known as the beige book, said that most of the country was experiencing ÿmoderate or gradualÿ economic growth because of improved hiring, higher wages and increased growth in several industries.þþThe Dow Jones industrial average rose 128.87 points, or 1.25 percent, to 10,414.13 yesterday. The Standard & Poor's 500-stock index climbed 1.5 percent, and the Nasdaq composite index rose 1.71 percent. The stock market, which surged late in the day, was responding not only to the economic data but also to quarterly profit reports from J. P. Morgan Chase, Bank of America and Yahoo, among others.þþIn addition, the markets reacted to a report showing rising inventories of oil and gasoline.þþÿWhen you look through the vast majority of reports - even the ones that are bad - what you see is the undertow is still pretty strong,ÿ said Jim Paulsen, chief investment strategist for Wells Capital Management.þþJoshua Shapiro, chief United Sates economist at Maria Fiorini Ramirez, an investment firm in New York, agreed with that assessment. ÿBasically, what they are saying is the underlying health of the economy was very good pre-hurricane and pre-spike in energy prices,ÿ he said. ÿAnd it is still pretty good after those things.ÿþþHousing starts, which measure the beginning of new construction, increased 3.4 percent, to a seasonally adjusted annual pace of 2.1 million, after dipping in July and August, the Commerce Department reported. New housing permits rose 2.4 percent, to an annual pace of 2.1 million.þþThe Fed's survey reported robust hiring in financial, professional and technical services and even cited labor shortages in industries like trucking. But it also noted concerns about rising energy prices, particularly higher home heating bills expected this winter, and the potential for weaker consumer spending and broader inflation.þþÿClearly, retailers are very nervous,ÿ Mr. Shapiro said, noting the early Christmas promotions.þþAnalysts and investors have been closely monitoring the housing sector to gauge the effects of higher interest rates. Some reports have shown that housing prices in some cities have fallen in recent months and that homes are staying on the market longer.þþEconomists had expected housing starts to fall to an annual rate of 1.97 million and building permits to dip to a pace of 2.08 million.þþThe latest data confirmed some economists' belief that home sales and prices are likely to remain at a fairly high level, without seeing the explosive growth rates of recent years or the sharp drop that some analysts have predicted.þþÿThe market is strong,ÿ said Ken Mayland, president of ClearView Economics, a research firm based in Pepper Pike, Ohio. But, he added, ÿI think we are in the final throes of these superstrong housing start numbers.ÿþþThe increased construction activity was not spread evenly across the country: housing starts were up 6.9 percent in the South and 1.9 percent in the Midwest, but unchanged in the West and Northeast, where the boom has been strongest until recently. Permits rose the most in the West, Northeast and Midwest, and fell in the South.þþThe Fed's beige book also said it was difficult to get a clear national picture on housing. Federal Reserve branches in Chicago, St. Louis, Dallas and San Francisco said activity was expanding or staying strong. But Boston and New York reported homes were not selling as fast. The Atlanta branch, which covers the Gulf Coast, said demand was strong in areas that have drawn evacuees from the hurricane-damaged areas.þþHome-building activity on the Gulf Coast is expected to pick up later this year and early next year. The areas affected by the storm make up just a small portion of the Southern economic region, 2.4 percent, according to the Commerce Department.þþAnother report yesterday, from the Mortgage Bankers Association, said loan applications for home purchases were up 7.3 percent last week. The average interest rate on a 30-year fixed mortgage was 6.03 percent last week, about a quarter-point higher than at the start of the year, according to Freddie Mac. Rates on five- and one-year adjustable rate mortgages have increased by half a point.þþExceptionally low mortgage rates, combined with the rapid growth in interest-only and adjustable-rate loans, have allowed more Americans to buy homes in recent years. They have also been blamed by some analysts for helping to feed regional housing bubbles.þþÿWe have some indications that housing markets are cooling off, although the signs are scattered and mostly anecdotal,ÿ Donald L. Kohn, a Fed governor, said in a speech in Pittsburgh yesterday. ÿA substantial slowing in the pace of house-price appreciation seems inevitable as prices reach high levels relative to interest rates, rents and incomes.ÿþþCiting the strength in the economy and rising prices, Mr. Kohn also suggested that the Fed would continue to raise interest rates. The Fed has raised the short-term fed funds rate that determines overnight borrowing costs between banks 11 times since June 2004. It now stands at 3.75 percent.þþThe beige book, which policy makers will consult when they meet next on Nov. 1, noted strength in the labor market, construction industry, manufacturing activity and lending.þþ
Source: NY Times
