WRAPUP 3-U.S. data points to growing economic momentum

Thu Mar 21, 2013 1:03pm EDT

Related Topics

* Jobless claims edge up but trend gauge drops to 5-year low
    * Home sales increase to 4.98 million unit annual rate
    * Markit flash PMI and Philadelphia Fed index both rise
    * Leading economic indicators also moves higher

    By Jason Lange
    WASHINGTON, March 21 (Reuters) - A clutch of data pointed to
growing momentum in the U.S. 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. 
        
    
    
    BUILDING STEAM
    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 U.S. mid-Atlantic region grew in March after
contracting for two months in a row. 
    Also, financial data firm Markit said its preliminary U.S.
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. 
    U.S. 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 U.S. Federal Housing
Finance Agency showed a 0.6 percent gain in January.
 
    Also pointing to momentum in the economy, a gauge of future
U.S. 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. U.S. stocks fell, as did yields on U.S.
government debt.
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