June 25, 2013 / 12:56 PM / in 5 years

WRAPUP 4-Upbeat data brighten U.S. economic outlook

* Durable goods orders rise 3.6 percent in May
    * Business spending plans gauge up 1.1 percent
    * Single-family home prices post largest gain in seven years
    * New home sales near five-year high in May

    By Lucia Mutikani
    WASHINGTON, June 25 (Reuters) - The U.S. economy appears to
be gaining momentum with data  showing strong gains in business
spending plans last month and the largest annual rise in house
prices in seven years in April.
    Other reports on Tuesday showed new single-family home sales
near a five-year high in May and consumer confidence at its
highest level in more than five years this month.
    The data suggested the U.S. economy was starting to pull out
of a soft patch and it supported the Federal Reserve's view that
risks to the economy have lessened. Fed Chairman Ben Bernanke
said last week the central bank would likely begin to slow the
pace of its bond-buying stimulus later this year. 
    "The economy is leaning forward and the data underscore that
it is time for the Fed to begin to move away from expanding its
balance sheet," said Steve Blitz, chief economist at ITG
Investment Research in New York.
    The upbeat economic signals pushed up stock prices, which
had been beaten up badly on investors' fears over the loss of
the Fed's stimulus. At the same time, prices for U.S. Treasury
debt fell as dealers braced for less bond buying by the Fed,
while the dollar rallied against yen and the euro.
    Durable goods orders increased 3.6 percent last month as
demand for goods ranging from aircraft to machinery rose, the
Commerce Department said. Orders for these goods, which range
from toasters to aircraft, had also risen 3.6 percent in April.
    Non-defense capital goods orders excluding aircraft, a
closely watched proxy for business spending plans, increased 1.1
percent. Economists had expected a gain of only 0.3 percent in
demand for these so-called core capital goods.
    "It signals increased confidence among the business
community about the sustainability of the economic recovery,
which could itself become self-fulfilling," said Millan
Mulraine, a senior economist at TD Securities in New York.
    Core capital goods shipments, used to calculate equipment
and software spending for the government's measures of gross
domestic product, rebounded 1.7 percent after a 2.0 percent drop
in April. The gain pointed to moderate growth in business
investment this quarter.
    In a second report, the department said new home sales
increased 2.1 percent to a seasonally adjusted annual rate of
476,000 units - the highest level since July 2008. It was the
third straight month of gains in new home sales.
    The housing market's strengthening tone was confirmed by the
S&P/Case Shiller home price composite index of 20 metropolitan
areas, which increased 12.1 percent in April from a year ago,
the largest annual rise since March 2006. 
    The now-entrenched housing recovery has helped lift consumer
confidence and made Americans less fearful about spending on
big-ticket items. The Conference Board said in another report
that its index of consumer attitudes rose to 81.4 in June, the
highest since January 2008, from 74.3 in May. 
    The housing recovery is boosting revenues for builders like
Lennar Corp, the No. 3 U.S. homebuilder. Lennar reported a
stronger-than-expected 53 percent rise in second quarter revenue
on Tuesday.
    "Our second-quarter results together with real-time feedback
from our field associates continue to point towards a solid
housing recovery," Chief Executive Stuart Miller said in a
    The pickup in the housing market has been driven by
record-low mortgage rates engineered by the Fed. Though mortgage
rates have risen sharply in anticipation of less central bank
stimulus, economists do not think the recovery will be derailed.
    "Housing will remain a bright spot for the economy, even if
rates do remain somewhat elevated," said Diane Swonk, chief
economist at Mesirow Financial in Chicago. 
    In addition to boosting household net worth, which supports
consumer spending, the housing recovery has spilled over to
manufacturing by fuelling demand for construction materials and
consumer items like stoves and refrigerators. This has helped
offset cuts in government spending and slowing global demand.
    Last month, demand for durable goods rose in all categories,
with the exception of motor vehicles. Other details of the
report also showed strength with unfilled orders and shipments
both increasing, and inventories up only marginally.
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