
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: FRIDAY, March 3, 1995                   TAG: 9503030101
SECTION: BUSINESS                    PAGE: A-9   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

NEW HOME SALES, INCOMES SHOW SOLID GROWTH IN JAN.

New-home sales rose in January despite higher interest rates, while the incomes of Americans advanced at a rate exceeding spending increases.

But analysts said the economy is slowing and there is little cause for financial markets to worry that overheating will generate inflation.

The Commerce Department said Thursday that sales of new homes rose 3.8 percent in January to a seasonally adjusted annual rate of 679,000, the highest level in three months.

``It's fairly strong, but it's off the peak,'' said economist Cynthia Latta of DRI-McGraw Hill, a Lexington, Mass., forecasting firm. ``The market has been held up by adjustable rate mortgages,'' she said, and warmer-than-usual weather also has helped.

She noted that another report this week showed existing-home sales dropped in January to their lowest level in nearly two years and housing starts also are down.

In another report, the Labor Department said the number of newly laid-off Americans filing claims for jobless benefits fell 13,000 to a seasonally adjusted 331,000 last week.

January's income gain was no surprise but is still the biggest increase in three months. It was more than twice the 0.4 percent increase in spending.

Analysts pointed to a drop of 1 percent in spending for big-ticket durable goods as a sign the economy is cooling, even though the durable-goods decline was more than offset by higher spending on services and nondurable goods such as food and fuel.

Consumer spending represents two-thirds of the nation's economic activity and has been a key to robust growth. The government reported Wednesday that the economy surged 4.6 percent in the last three months of 1994 and grew 4 percent for the year, the best showing in a decade.

The Commerce Department said that incomes climbed 0.7 percent in December, revised from an earlier estimate of up 0.8 percent. Spending increased 0.1 percent in December.

Disposable income - income after taxes - rose 0.7 percent in January after gaining 0.8 percent the previous month.

The combination of incomes and spending meant that Americans' savings rate - savings as a percentage of disposable income - climbed to its highest level in nearly two years.

by CNB