Durable goods orders rise slightly, existing home sales gain.

WASHINGTON - New orders for durable goods posted a small gain in April while existing home sales continued climbing despite higher mortgages rates, according to two reports released yesterday.

The Commerce Department said that new orders for durable goods inched up 0.1% in April to a seasonally adjusted annual rate of $147 billion. Meanwhile, the National Association of Realtors reported that sales of existing homes grew 1.2% to an annual rate of 4.12 million units.

Analysts said that the reports did not deter them from their belief that the economy is growing at a stronger pace in the second quarter than it did in the first, when U.S. output rose 2.6%.

"This shows we're still on a pretty steady growth track," said Darwin Beck, director of the economics department at CS First Boston. He predicted around 4% growth in the second quarter.

The 0.1% gain in orders for durable goods fell short of analysts' expectations of an advance in the 0.5% to 1% range, but economists noted that orders in March were revised up to show a 0.7% gain from the previously reported rise of 0.4%. Moreover, excluding the volatile transportation sector, orders posted a 0.6% gain in April - the eleventh straight monthly increase.

"In general, this is a pretty quirky report," said John Mueller, chief economist of Lehrman Bell Mueller Cannon Inc. in Arlington, Va. "I expect a little bounce back in growth from the first quarter." He forecast growth of at least 3% this quarter.

The 1.2% gain in existing home sales in April came as no surprise to analysts. Sales have advanced 11 out of the last 13 months, with the only two declines coming in January and February, when the weather was abnormally severe in much of the nation.

Sales rose despite higher mortgage rates and higher home prices. The realtors' group said 30-year fixed rate mortgages averaged 8.32% in April compared to 7.68% in March. The group also reported that the average home price increased to $135,300 from $134,400 in March.

Opinions among economists were mixed on whether home sales will level off because of higher mortgage rates or if sales will continue climbing because the demand is there. "That's the $64,000 question," Beck said. "Is April's gain the result of underlying demand or borrowing sales from the future because of higher mortgage rates?"

Ian Borsook, a senior economist with Merrill Lynch, predicted that home sales will continue improving for a few more months before they plateau. He forecast economic growth of 3.5% to 4% in the second quarter.

Borsook also said that durable goods orders will probably surge in either May or June because Saudi Arabia's large aircraft order from the United States will be included in one of the sports. "Orders next month might be extremely strong," he said.

The Commerce Department said that new orders for transportation equipment fell 1.6% in April, as a decline in rail and auto products more than offset an increase in aircraft and parts.

The report does not provide specific detail on the auto industry. Analysts said the recent slowdown in auto production from very high levels was probably mirrored in the report, as it was in the Federal Reserve's industrial production report for April.

Borsook predicted that auto production would probably remain strong in the coming months and suggested that that seasonal adjustments probably helped to overstate the drop in orders for autos and parts.

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