Good News For The Economy
Item: The Federal Reserve today announced that short-term interest rates will remain unchanged.
Item: Sales of new homes soared to a record high in February, the most recent months for which figures are available. That announcement was made within the past 36 hours.
Item: Also announced today, American consumer confidence fell in March, down a bit from the record high of the previous month.
Quick analysis: All of this figures to be good news for the economy. Or perhaps better stated, there are encouraging signs in this for the economy.
Reasons: Low interest rates are one of the reasons the economy has been so healthy. The fact that the Federal Reserve has decided to leave short- term rates where they are indicates that, despite some labor shortages and some fast income gains -.the kinds of things that sometimes cause inflation, the Fed doesn't see signs of inflation taking any big jump. Not yet, anyway. And, by the by, low inflation is another of the reasons the American economy has been so healthy.
Moving along... the record high sales of new homes is especially encouraging. Frankly, it's a bit surprising how little most newspapers and some newscasts made of this news. Here's why. This report underlines tremendous momentum in the economy here. That momentum could help the U.S. get through the year somewhat better than many doomsayers have been predicting. One of the reasons doubters have been worried about l998 is weakness in exports by American businesses to Asia.
But this news about new home sales soaring means jobs, and business all down the line in home building and repair. Maybe enough to offset losses in Asia.
Fears that what has happened to Asian economy may spread here and cause big trouble are part of the reason today's report on consumer confidence shows American consumer confidence going down.
So how is that encouraging news? Well, it indicates rank-and-file Americans are informed and cautious - as they should be -.about what's happening on the world economic state, especially in Asia.
This kind of let's-watch-closely attitude is healthy, especially in a booming America that could become overconfident.
All in all, another good week of very encouraging signs for the economy.
Dan Rather Reporting may be heard daily on the CBS Radio Network.
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