Big-ticket-item sales soar in July
WASHINGTON - Consumers and businesses went on a big-ticket spending spree in July, sending home, car, and equipment sales soaring by the largest amount in years.
The sales, detailed yesterday in two government reports, confirmed a subtle but marked shift in confidence about the economy. Sales of new homes jumped almost 10 percent from June, while orders for long-lasting goods like appliances, planes, and computers rose nearly 5 percent, the third increase in the past four months.
“It looks like we’ve hit bottom and we’re now slowly trying to dig our way out,’’ said Nigel Gault, chief US economist at Lexington, Mass.-based IHS Global Insight.
Still, it remains unclear whether the growth can be sustained. Though the increases in housing sales and manufacturing last month were dramatic, they came from extraordinarily low levels and were fueled by temporary government programs like cash for clunkers and tax credits for home sales.
Most economists agree the recession, which began in December 2007, has ended or is ending. Some say the economy is poised to grow strongly in the July-September quarter, but will probably show weaker growth after government stimulus spending tapers off.
Sales of new homes surged to a seasonally adjusted pace of 433,000 in July from 395,000 in June, the Commerce Department said. Driven by falling prices, the fourth-straight monthly increase was greater than expected.
While sales are off nearly 70 percent from the frenzied peak of four years ago, they are still up more than 30 percent from the bottom in January - a big relief after a long and painful decline.
“We can stop worrying about the housing market and start playing closer attention to other issues, such as when credit will start flowing more freely,’’ wrote Joel Naroff, chief economist at Naroff Economic Advisors.
As home sales rise, builders will gradually need to hire more workers, reversing the trend that saw 1.4 million industry jobs shed since the recession began. “These are crucial elements of a sustainable recovery,’’ wrote David Resler, chief economist at Nomura Securities.
Construction job losses have slowed recently, with 76,000 lost in July, about half January’s level.
Buyers are rushing to take advantage of a federal tax credit that covers 10 percent of the home price, or up to $8,000, for first-time owners. Home sales must be completed by the end of November for buyers to qualify.
Builders fear the end of the credit could hurt sales. A bill has been filed to extend it for another year, raise it to $15,000, and make it available to all buyers.