Data points to growing economic momentum
WASHINGTON (Reuters) - A clutch of data pointed to growing momentum in the economy during the first quarter, with jobless claims trending lower and factory activity and homes sales both on the rise.
The reports on Thursday built on recent upbeat data on hiring and consumer spending that have led many economists to see a sharp rebound in economic growth despite the onset of increased fiscal austerity. In particular, the claims data suggested March could be another month of solid job gains.
"There is enough strength in the economy to generate jobs on a sustained basis," said Sam Bullard, an economist at Wells Fargo in Charlotte, North Carolina.
Forecasting firm Macroeconomic Advisers said the data backed its view that gross domestic product would expand at close to a 3 percent annual rate in the first three months of the year. The economy eked out a growth rate of just 0.1 percent in the fourth quarter.
However, Bullard and others noted that government belt tightening and the growing risk of a flare-up in Europe's debt crisis are creating headwinds for the economy that could still cause trouble ahead. On Wednesday, the Federal Reserve also indicated it was concerned about these issues when it pressed forward with its aggressive policy stimulus.
The federal government raised taxes on most Americans in January and a gaggle of budget cuts began this month, with the economic bite from reduced government spending expected to be concentrated in the next few months.
"The first quarter of 2013 is shaping up to be pretty good," said Joshua Dennerlein, an economist at Bank of America Merrill Lynch in New York. "(But) as the Fed noted yesterday, we are worried about the second and third quarter with the fiscal tightening."
While the number of Americans filing new claims for jobless benefits edged higher last week to 336,000, a trend reading dropped to its lowest level in five years.
That bodes well for job creation in March because the data covered the survey period for the government's monthly tally of nonfarm jobs. The four-week average of new claims fell last week to 339,750, down 6 percent relative to the survey week in February, when nonfarm payrolls increased by 236,000.
Gennadiy Goldberg, a strategist at TD Securities in New York, said the four-week average, which is seen as a measure of labor market trends, was consistent with a March payroll reading above 200,000.
Separately, two surveys of industry showed an increase in activity at American factories despite weakness in overseas markets like Europe.
The Philadelphia Federal Reserve Bank said manufacturing activity in the mid-Atlantic region grew in March after contracting for two months in a row.
Also, financial data firm Markit said its preliminary Manufacturing Purchasing Managers Index, which gauges activity nationwide, increased to 54.9 this month from 54.3 in February.
Data on the housing sector, which was blighted by the 2007-09 recession, was also upbeat.
Home resales hit a three-year high in February and prices jumped, adding to signs of an acceleration in the housing market recovery.
The National Association of Realtors said existing home sales increased 0.8 percent to an annual rate of 4.98 million units last month, the highest level since November 2009. The January sales pace was revised up a 4.94 million units from the previously reported 4.92 million units.
Another measure of home prices by the Federal Housing Finance Agency showed a 0.6 percent gain in January.
Also pointing to momentum in the economy, a gauge of future economic activity rose for a third straight month in February.
The positive signs on the economy were overshadowed in financial markets by a decline in tech sector shares and by worries that a banking crisis in Cyprus could enflame the European crisis. Stocks fell, as did yields on government debt.