New home, manufacturing sales lift economy

Manufacturing, new homes aid rebound

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WASHINGTON --- The economic recovery got a lift in April as orders for large manufactured goods surged while sales of new homes benefited from homebuyer tax credits.

Manufacturing is helping drive the rebound, but some economists worry about the threat posed to U.S. exports from the widening debt crisis in Europe. Some also fear that home sales will falter in coming months because the tax breaks for buyers have expired.

Still, economists found the two Commerce Department reports released Wednesday generally encouraging.

"These are very strong numbers which suggests that the second quarter started off on a very solid note," said Mark Zandi, chief economist at Moody's Analytics.

Demand for commercial aircraft lifted orders for durable goods 2.9 percent last month -- the best showing in three months. Excluding transportation, orders fell 1 percent in April, after the March figures were revised to show a 4.8 percent jump.

Sales of new single-family homes jumped 14.8 percent in April. That gain followed a 29.8 percent gain in March, the biggest monthly increase in 47 years.

Home sales have surged this spring as buyers rushed to sign sales contracts before tax credits expired on April 30.

Historically low mortgage rates also helped fuel purchases.

Sales are expected to slump in the coming months as households deal with slow job growth and tight credit. Even with sales rising, the median price of a new home tumbled last month, dropping 9.6 percent to $198,400. That indicates continued stress in the housing market.

Manufacturing has held steady during the recovery. U.S. companies are benefiting from rising demand at home and in major export markets. Some fear the debt crisis in Europe could derail the global recovery and depress U.S. exports.

The overall economy, as measured by the gross domestic product, grew at an annual rate of 3.2 percent in the January-March quarter. Economists thinks that figure will be revised slightly higher today to 3.4 percent.

The rise in April orders was led by a 228 percent surge in demand for commercial aircraft, a volatile category. Boeing Co. booked orders for 34 new 777 planes, minus four cancellations. The orders included four freighters for FedEx, which has said it sees the economy improving.

Last year, Boeing cut production rates. Now, with demand rising, Boeing has said it will speed up production of the 777 in addition to its large 747 next year. It will also accelerate production of the smaller 737 in 2012.

Orders for motor vehicles climbed 1.6 percent in April. Total transportation orders rose 16.1 percent.

The 1 percent drop in orders excluding transportation resulted from declines in some sectors, such as heavy machinery, that had seen big gains in March. Analysts said the slight dip is a momentary pause and not a sign of weakness.

Interest rates going up

Interest rates climbed in the bond market Wednesday as positive data on durable goods orders and home sales raised expectations about the U.S. economy.

The improved economic news from the Commerce Department helped reassure investors that the recovery is continuing, reducing demand for safe investments such as Treasurys.

The yield on the 10-year Treasury note maturing in May 2020 rose to 3.19 percent in afternoon trading from 3.16 percent late Tuesday. Its price fell 12.5 cents to $102.59375. Bond yields rise when their prices fall.

-- Associated Press

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