Washington - The U.S. economy appears to be headed for a broad-based expansion without the inflationary pressures that normally accompany a rebound, a senior Treasury official said yesterday.
Alicia Munnell, assistant secretary for domestic finance, said administration officials have been cheered by the latest economic statistics and dropped their worries of earlier this year that the recovery could fade.
"Moderate and balanced economic growth is occurring, with private-sector investment leading the way," Munnell said in remarks at the opening of a meeting of the Treasury's borrowing advisory committee. Inflation has been reduced significantly and shows little sign of re-emergence."
Munnell said that administration officials would like to see faster employment growth, and she acknowledged that some sectors of the economy and parts of the United States Remain weak. Still, she told the panel, "Downside risk to the economy seems to have faded somewhat as a major concern,"
The upbeat comments on the economic outlook came after the Commerce Department reported that the leading index of economic indicators gained 0.5% in September, following a 0.9% advance in August. They were the first back-to-back gains for the index since November and December of last vear.
Another report issued by the department yesterday says that new single-family home sales surged 20.8% in September to a seasonally adjusted annual rate of 762,000 units, far exceeding analysts' expectations of about a 5% galin.
"It was staggering - quite a surprise," said Ian Borsook, a senior economist with Merrill Lynch & Co.
The reports are the latest in a series of statistics portraving a faster pace of growth for the second half of the year. Analysts said they expect last week's report from the Commerce Department showing a 2.8% increase in gross domestic product during the third quarter to be revised up, and some analysts say growth in the current quarter could reach 4%.
A Commerce Department official said new home sales of 762,000 in September hit the highest level since December 1986, when they reached 784,000.
The department also revised upward its estimates of sales levels for the two previous months. August sales were revised to a rate of 631,000 from 616,000. and July sales were revised to 645,000 from 636,000.
Economists said the report represents a clear sign that the housing market is improving. But they noted that the market cannot sustain a sales rate much above 650,000. The report, they said, also provides another indication the economy is gaining momentum going into the fourth quarter.
"It was a good report, but the housing market probably is not really as good as the report makes it look," said Nancy Kimelman, chief economist of Technical Data. "There is no question that we're seeing an improvement in the housing sector."
Kimelman said that much of the large September gain resulted from seasonal adjustments to the figures. The seasonal adjustment compensates for a routine drop in nominal sales figures from August to September.
But that drop did not occur this year. Home sales in September increased to 58,000 from 57,000 in August on a non-seasonally adjusted basis, the department reported. A department official also said the seasonal adjustment probably contributed to the exceptionally large increase.
Russell Sheldon, a senior economist with Mellon Bank, said the important thing is that the underlying trend in home sales is on an unmistakable upward trend. "There is no way to discredit the strength we're seeing," Sheldon said. "The bottom line is that we should not quibble with the signs we get of stronger growth."
Monthly home sales have averaged a 644,000 rate so far this year, according to government statistics. On the high side of expectations, Sheldon said the trend in home sales will continue to improve, with the market reaching and sustaining a sales rate perhaps as high as 700,000.
Other analysts said they expect home sales to drift upward in the remaining months of the year and level off around a 650,000 rate.
Total home sales in the first nine months of this year are 6.3% higher than the same period last year, the department reported. Analysts said they expect sales this year to end about 5% better than last year, which should be viewed positively, given the slow job growth this year.