Economy shows 'steady' growth

WASHINGTON // An increase in demand for commercial aircraft pushed orders for big-ticket manufactured goods higher in March, and sales of new homes shot up at the fastest pace in 13 years, reflecting a rebound from bad weather in February.
The Commerce Department reports depicted an economy continuing to expand at a healthy pace, a view supported yesterday by a survey of business conditions around the country from the Federal Reserve.

The Fed's 12 regional banks used words such as "solid" and "steady" to describe the economy's performance in March and early April. The Fed did note that "higher energy prices were at the forefront of most districts' mention of cost pressures," and that was before crude oil soared to a record $75.17 per barrel Friday.

Some analysts said the strong growth, plus rising inflation pressures, will mean the central bank's rate-setting Federal Open Market Committee will not only raise rates for a 16th time at its next meeting in May but will keep going after that.

"The U.S. economy is firing on all cylinders right now, and there is little to no slack left," said Sherry Cooper, chief economist at Harris Bank in Chicago. "This makes it increasingly unlikely that the Fed will pause after the May 10 FOMC meeting."

The Commerce Department said sales of new single-family homes rose 13.8 percent last month to a seasonally adjusted annual sales rate of 1.213 million units. The increase represented a recovery from a 10.9 percent plunge in sales in February.

But the median price of homes sold in March dropped to $224,200, down 2.2 percent from what homes were selling for in March 2005.



Rates on 30-year mortgages rose last week to 6.53 percent, the highest level in nearly four years, with economists forecasting they could be about 7 percent by the end of this year.

Home sales were up in all areas of the country in March led by a 35.7 percent surge in the West, followed by gains of 10.9 percent in the Midwest, 6.9 percent in the South and 4.7 percent in the Northeast.

The number of new homes remaining on the market in March rose to a record 555,000, up 2.8 percent from February.

The government also said yesterday that orders to factories for big-ticket manufactured goods soared 6.1 percent in March, the biggest gain in 10 months. Two-thirds of the increase reflected a 71.1 percent rise in demand for commercial aircraft,

The overall increase in orders for durable goods followed a 3.4 percent February advance and is more than three times the advance Wall Street had been expecting. Manufacturing is expected to remain strong in coming months as businesses restock lean inventories and boost spending to expand and modernize.

"Businesses remain confident in the economic outlook and are committing to significant capital investments," said David Huether, the National Association of Manufacturers' chief economist.