Far-flung gains show U.S. chugging past global slowdown

WASHINGTON – The U.S. economic expansion, now in its sixth year, shows no sign of flagging as home sales climb, factories pump out more goods and the labor market strengthens.

Existing homes sold at a 5.26 million annual pace in October, the most since September 2013, the National Association of Realtors reported today in Washington. Manufacturing in the Philadelphia region surged this month, fewer Americans filed claims for jobless benefits last week and a gauge of the outlook for the next six months beat forecasts, other data showed.

“It’s all encouraging,” said Kathleen Bostjancic, a financial-market economist at Oxford Economics in New York. “All the data are lining up on the strong side, indicating the economy is accelerating.”

Retailers such as Best Buy Co. are getting a lift as an improving job market and the cheapest gasoline prices in four years boost consumer confidence heading into the holiday- shopping season. The reports bear out forecasts from Federal Reserve policy makers, who last month predicted that the global slowdown would have a “quite limited” effect on the U.S.

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The Standard & Poor’s 500 Index rose, paced by rallies among retailers and energy companies. The S&P 500 climbed 0.1 percent to 2,050.8 at 12:56 p.m. in New York.

The U.S. data helped reverse a drop in equity futures earlier in the day after reports economies abroad were weakening. A purchasing managers’ index for factories and services in the euro area unexpectedly dropped in November to the lowest level in 16 months, according to London-based Markit Economics. In China, a factory gauge fell this month to a six- month low.

Fed minutes

Minutes of the Fed’s Oct. 28-29 meeting issued yesterday showed officials discussed global economic developments, which ultimately didn’t figure in their post-meeting statement. While policy makers “pointed to a somewhat weaker economic outlook and increased downside risks in Europe, China, and Japan,” they judged that the impact on the U.S. economy is “likely to be quite limited.”

Purchases of previously owned U.S. homes last month climbed 1.5 percent from a revised 5.18 million pace in September, the real-estate agents’ group said. It was the fifth consecutive month that the sales pace topped 5 million. Prices also climbed, the group said.

Employment growth and mortgage rates near historic lows are helping stir buying interest that will probably continue to underpin the economy.

‘Healthier’ market

“This is much healthier than we’ve seen over the last year or so,” said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla., who projected a 5.25 million pace of sales. “We’re still a long way from recovery, but we’re on our way.”

The median forecast in a Bloomberg survey of 78 economists called for a 5.15 million pace of resales, with estimates ranging from 5.05 million to 5.27 million. September’s figure was revised from a previously reported 5.17 million.

The Federal Reserve Bank of Philadelphia’s factory index jumped to 40.8 in November, the highest since 1993, the branch of the central bank reported. Readings greater than zero signal growth. The orders gauge surged to the highest level since 1988.

Other manufacturing data today was less ebullient. The Markit Economics preliminary index for this month decreased to a 10-month low of 54.7. A reading greater than 50 indicates expansion. The slowdown was paced by a drop in exports that probably reflects weakening economies elsewhere.

Fewer claims

Today’s news on the labor-market front was more upbeat. Jobless claims fell by 2,000 to 291,000 in the week ended Nov. 15 from an upwardly revised 293,000 in the prior period, according to the Labor Department. It was the 10th straight week the number of applications for unemployment benefits has been lower than 300,000, which hasn’t happened since 2000.

The drop in claims “bodes well in terms of payroll growth,” said Gregory Daco, lead U.S. economist at Oxford Economics. “We’re seeing good prospects and a strong trend.”

The recent drop in claims was among reasons the index of leading economic indicators rose last month. The Conference Board’s gauge of the outlook for the next three to six months climbed 0.9 percent in October, the most since July, the New York-based group said today.

The trend in the index “points to continued economic growth through the holiday season and into early 2015,” Ken Goldstein, an economist at the Conference Board, said in a statement. “This is consistent with our outlook for relatively good, but not great, consumer demand over the near term.”

Increasing sales

Richfield, Minn.-based Best Buy, the world’s largest electronics chain, posted a surprise sales gain last quarter amid demand for high-definition televisions.

Even after its biggest increase in same-store sales in more than four years, Best Buy said revenue this quarter will be little changed. Chief Financial Officer Sharon McCollam cited hurdles such as heavy discounting this holiday season and a potential shipping disruption from labor negotiations at West Coast ports.

“The promotional environment is already intense, a little bit more intense than last year,” CEO Hubert Joly said on a conference call.

American consumers are getting a lift from falling fuel costs. The average price of a gallon of regular unleaded gas was $2.85 as of Nov. 19, its lowest level since November 2010, according to AAA, the largest U.S. auto club.

Sentiment firms

Consumer sentiment advanced last week to the highest level since January 2008 as Americans grew more optimistic about their financial well-being and the buying climate, according to another report today. The Bloomberg Consumer Comfort Index climbed to 38.5 in the period ended Nov. 16 from 38.2 the week before.

“The biggest point for consumers is it’s going to be a little bit easier with those gasoline prices coming down,” said Anika Khan, a senior economist at Wells Fargo Securities LLC in Charlotte, N.C. “I’m optimistic.”

The drop in energy prices kept the U.S. cost of living little changed last month, according to Labor Department data also issued today. No change in the consumer-price index followed a 0.1 percent increase in September. Core costs, which strip out food and fuel, rose 0.2 percent in October, the biggest gain in five months.

Rising costs for rents, airline fares, hotel rooms and furniture show the slowing in overseas growth that is helping restrain fuel prices and overall inflation isn’t rippling through the economy. Some Fed policy makers have been among those predicting that cooling price pressures will prove temporary as the U.S. economy strengthens.

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