Housing, factory gains lift U.S. economy

Home prices rose 8.1 percent in January but

Home prices rose 8.1 percent in January but are still 29 percent below their peak in 2006. (Credit: AP Photo Nam Y. Huh)

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Gains in housing and manufacturing propelled the U.S. economy over the winter, according to reports released Tuesday, and analysts say they point to the resilience of consumers and businesses as government spending cuts kick in.

U.S. home prices rose 8.1 percent in January, the fastest annual rate since the peak of the housing boom in the summer of 2006. And demand for longer-lasting factory goods jumped 5.7 percent in February, the biggest increase in five months.

February new-home sales and March consumer confidence looked a little shakier. But the overall picture of an improving economy drove stocks higher yesterday.

"There is nothing in this data that says the economy is falling back," said Joel Naroff, chief economist at Naroff Economic Advisors.

A recovery in housing has helped lift the economy this year and is finally restoring some of the wealth lost during the recession.

The year-over-year rise in home prices reported by the Standard & Poor's/Case Shiller 20-city index was the fastest since June 2006.

Prices rose in all 20 cities, and eight markets posted double-digit increases, including some of the hardest-hit during the crisis.

The strength in home prices has far from erased all the damage from the crisis. Home prices nationwide are still 29 percent below their peak reached in August 2006.

Still, steady gains should encourage more people to buy and put their homes on the market, keeping the recovery going. And higher home prices make people feel wealthier, which leads consumers to spend more and drives more economic growth.

Manufacturing is also boosting the economy this year, and factories were busier in February, according to a separate, Commerce Department report on durable goods orders.

February's increase was driven by a surge in commercial aircraft orders. Orders for motor vehicles and parts increased solidly, suggesting demand for cars and trucks remains strong.

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