The American economy is gaining renewed momentum, with data released on Tuesday suggesting strong demand by businesses for airplanes, machinery and other manufactured items, as well as rising confidence among consumers, despite a cooling in the housing market.þþOverall orders for durable goods in July jumped by 22.6 percent, the biggest one-month increase since the Commerce Department began compiling this series of data in 1992.þþThat strength, though, was exaggerated by a huge surge in demand for airplanes made by Boeing.þþExcluding the always-volatile transportation sector, core capital goods orders fell by 0.5 percent in July, but remain up more than 11 percent over the most recent three months on an annualized basis.þþ“The U.S. economy is on solid ground,” said Nariman Behravesh, chief economist at IHS. “Europe is struggling, Japan is struggling, but all of this suggests the U.S. is doing quite well.”þþBy contrast, he said, growth in Europe is running at under a 1 percent pace, while the Japanese economy is expanding at about 1.5 percent on an annualized basis.þþInvestors were encouraged by Tuesday’s data, with the Standard & Poor’s 500-stock index closing above 2,000, and the Nasdaq and Dow Jones industrial average showing similar modest gains.þþA healthier job market and the recent surge in stocks, which has lifted the S.&P. 500 into record territory, has helped consumer confidence to rebound. On Tuesday, the Conference Board reported in its monthly survey that its main consumer confidence measure rose in August to its highest level since October 2007, before the start of the recession.þþAlthough evidence of an upsurge in growth has sometimes worried investors because it could mean a sooner-than-expected increase in interest rates by the Federal Reserve, those fears have eased lately in the wake of the reassuring speech in Jackson Hole, Wyo., last week by Janet L. Yellen, the Fed’s chairwoman.þþThe only weak spot in Tuesday’s flood of economic indicators was the housing market, where the S.&P./Case-Shiller’s index of home prices in 20 cities registered a decline of 0.2 percent in June, on a seasonally adjusted basis. Thirteen out of the 20 cities surveyed showed a fall in home prices, and the drop surprised economists, who had expected the index to remain flat in June.þþ“Housing has had a strong recovery in recent years and now it’s leveling off,” Mr. Behravesh said. “It won’t be the engine of growth that it’s been, but that’s not necessarily a bad thing. We can worry about soft housing prices, but there is no bubble in the making.”þþGuy Berger, United States economist at RBS, added that after a strong performance in 2012 and 2013, homes aren’t as undervalued as they were previously.þþ“With rents going up in recent years, it became more favorable to buy,” Mr. Berger said. “The easy gains are behind us in terms of housing.”þþMore significant than any cooling in housing is that businesses are beginning to invest more aggressively again, he added, citing the strong figures for durable goods orders Tuesday.þþ“The main takeaway from today’s data is that businesses’ spending is moving at a faster pace,” he said. “Some is catch-up, and some is acceleration, but it looks set to continue in the third quarter.”þ
Source: NY Times
