Big-ticket item sales shoot up

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 in two government reports Wednesday, confirmed a shift in confidence about the economy. New home sales jumped almost 10 percent from June, while orders for long-lasting goods like appliances, planes and computers rose nearly 5 percent in July, 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 U.S. economist at 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 such as cash for clunkers and tax credits for home sales.

Most economists now agree the recession that 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, providing another sign the housing market is bouncing back from the historic bottom reached early this year. Driven by falling prices, the fourth-straight monthly increase was greater than expected. Sales haven’t risen so dramatically since February 2005.

While sales are still off nearly 70 percent from the frenzied peak 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,” Joel Naroff, chief economist at Naroff Economic Advisors, wrote in a note to clients.

Orders for transportation equipment, including cars, car parts and airplanes, rose more than 18 percent, helping to drive the durable goods data.