Posted on: Saturday, May 19, 2001

Reports likely to show economy on upswing

Bloomberg News Service

WASHINGTON — Reports next week will probably show that U.S. home sales held at close to record levels in April and that consumers became more optimistic this month — signs that the economy may be strengthening, analysts said.

While forecasts call for a 4 percent decline in new-homes sales in April, to 980,000 houses at an annual rate, the March pace of 1.02 million was a record. Sales of previously owned homes probably fell by 3.1 percent to 5.27 million houses at an annual rate from a March pace of 5.44 million, the second fastest ever.

Consumers feel better about their finances and economic prospects than they did in April. The University of Michigan is likely to report that its final index of consumer sentiment for May rose to 92.5, compared with a final reading of 88.4 in April. The expected May reading would be the highest in four months.

Housing and confidence "have held up surprisingly well this year and kept us out of recession," said David Jones, chief economist at Aubrey G. Lanston & Co. in New York. "These numbers will be watched particularly close by the Federal Reserve and the markets."

The Commerce Department issues the new homes report on Thursday.

Fed policy-makers have reduced the overnight bank lending rate five times this year in an effort to sustain the record economic expansion. The most recent reduction, on Tuesday, brought the rate down to 4 percent, the lowest in seven years.

Revised figures on first-quarter growth will probably show the economy grew at a slower pace than previously reported. Gross domestic product is likely to have expanded in the first three months of the year at a 1.4 percent annual rate, revised from a previous estimate of 2 percent. The economy grew in the fourth quarter of 2000 at a 1 percent rate, the slowest in 5ý years.