Revival on Track, Data Imply

WASHINGTON — Americans bought newly built homes and expensive manufactured goods at a brisk pace in July and a report on consumer confidence this month was surprisingly strong, indicating that the U.S. economic recovery was on course.

In a report issued Tuesday, the government said sales of new homes dipped slightly last month, but the total was still ahead of expectations because June’s record high sales pace was revised upward.

Although down 2.9% from June, July’s new-home sales were still at their second-highest level ever.

In other encouraging reports, the Commerce Department said durable goods orders rose 1% in July and the Conference Board said its consumer confidence index climbed to 81.3 in August from an upwardly revised 77 in July. But the confidence survey also suggested that job seekers still were having a tough time finding work.

“The general conclusion that I would draw is that the recovery is gaining momentum but a large proportion of the population is still waiting for some more proof,” said Mark Vitner, an economist at Wachovia Securities.

After a mostly negative day, stocks closed slightly higher, with the Dow Jones industrial average ending up 22.81 points at 9,340.45.

Treasuries initially fell after the release of the data but rallied as equities sank. The dollar showed little reaction to the economic reports.

Demand for cars led the rise in durable goods orders, but there were increases across the board. Orders of motor vehicles and parts surged 5.5% and machinery orders climbed 1.8%, while demand for computers and electronics rose 1.9%.

Excluding transportation, orders rose 1.7%, and without spending on defense, orders were up 1.4%.

“Overall, it’s a healthy report, and I think it continues the very upbeat picture that has been painted now for a couple of months, that manufacturing is finally coming out of its slump,” said Mike Niemira, senior economist at Bank of Tokyo-Mitsubishi.

The home sales report showed that even as the U.S. housing boom begins to slow as mortgage interest rates rise from 40-year lows, house-buying remains attractive.

Sales of new single-family homes slipped to a 1.165-million seasonally adjusted annual rate from a record 1.20-million rate in June.

“The housing market remains strong and one piece of data that jumps out is that inventories of unsold homes are very, very low, suggesting that even through the end of the year, you’re going to see continued construction strength,” said Mickey Levy, chief economist at Banc of America Securities.

Inventories equaled June’s record low of 3.5 months’ supply of homes available for sale at the current sales pace.

In another good sign for the economy, consumers said they were feeling more optimistic in August about the future. The Conference Board’s confidence index showed the expectations component jumped to 94.4 from 86.3 in July.

But pointing to the current conditions index, which dipped to 61.6 from 63.0, analysts offered a word of caution.

“The consumer number isn’t really as good as it looks,” said Drew Matus, economist at Lehman Bros.

“The simple fact of the matter is the labor market is still holding back people’s confidence, and in the long run will probably hold back people’s willingness to spend additional money.”