U.S. factories booked orders more briskly and new-home sales rose to a record high last month, the government reported yesterday, adding to other recent signs that the economy is gaining momentum.
New orders for big-ticket manufactured goods rose 1.4 percent in June, the Commerce Department said yesterday. It also increased its previous estimate of May orders for such durable goods -- items expected to last at least three years, such as computers, machinery and appliances -- to a 6.4 percent increase, reflecting in part some big aircraft orders.
Sales of new single-family homes increased 4 percent last month to an annual pace of 1.37 million, the department said in a separate report.
Other recent reports shows that consumers bought previously owned homes at the highest rate ever in June, retail sales were stronger and employers hired more people.
The department is scheduled to release tomorrow its first estimate of U.S. economic growth in the second quarter. By yesterday, however, it appeared clear that the quarter ended strongly.
The durable-goods report was "one more indication that the pace of growth is accelerating," said Nariman Behravesh, chief economist at Global Insight, an economic research and analysis firm.
If the economy continues to pick up steam, and price pressures persist, the Federal Reserve would be likely to continue raising short-term interest rates higher than many investors and analysts expect, to keep inflation contained.
Fed officials raised their benchmark short-term interest rate to 3.25 percent from 3 percent at their last meeting in late June, the ninth increase in a year. They are likely to raise it to 3.5 percent at their next meeting, on Aug. 9.
Global Insight, like many forecasters, recently predicted that the Fed would stop raising the rate after moving it gradually to 4 percent this year. By yesterday, however, Behravesh said he expected the Fed to continue raising the rate early next year, to as high as 4.5 percent.
The Fed's latest survey of regional economic conditions, also released yesterday, echoed the other reports by portraying an economy accelerating in June and the first half of July.
Three of the 12 regional Fed banks, including those with headquarters in Richmond, Dallas and Cleveland, reported quickening economic growth. The Richmond Fed's district includes the Washington area. Only the New York Fed reported slower growth in its region; the others said their regional economies continued to expand at solid or moderate rates.
The report compiles summaries and anecdotes from each of the banks to provide Fed policymakers in Washington with a better feel for the economy's health as they prepare for their next meeting.
For example, a plastics manufacturer in North Carolina responded to the Fed's survey by saying the company was "very busy right now. We have some good new orders in-house and pending, so I'm optimistic about the next few months."
That fit with the durable-goods report, which provided "a very positive sign that the manufacturing expansion is on a solid footing," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI, a business research organization.
Some of the rise in durable goods orders last month was because of a 16.9 percent increase in orders for defense capital goods, including small arms, communications equipment, aircraft, ships and space vehicles. After excluding defense items, durable-goods orders rose 0.9 percent last month, with some of the strongest gains by makers of computers, communications equipment and machinery.
The Fed report concluded that "residential real estate activity remained robust overall but showed a few signs of cooling in some Districts."
While home sales continued to climb, the Commerce Department report showed the median price of a new single-family home fell slightly in the 12 months that ended in June, to $214,800.
The price drop "means that sales have been relatively stronger at the low end of the market," said Michael Carliner, a vice president the National Association of Home Builders.
At the same time, however, the median sales price of previously owned homes of all types rose 14.7 percent, to $219,000, in the year that ended in June, the fastest rate in almost 25 years, the National Association of Realtors said Monday.
"There is no reason at all to expect any significant decline in [home] sales unless and until there is a meaningful, sustained rise in mortgage rates," said Ian Shepherdson, chief U.S. economist for High Frequency Economics.
Staff writer Sandra Fleishman contributed to this report.