Make us your home page
Instagram

U.S. economy showing strength as spending cuts loom

Sales of new homes jumped nearly 16 percent in January. Home prices are also rising steadily, and banks are lending more.

Sales of new homes jumped nearly 16 percent in January. Home prices are also rising steadily, and banks are lending more.

WASHINGTON — Even with automatic spending cuts looming, the outlook for the U.S. economy brightened a bit Tuesday after reports showed that Americans are more confident and are buying more new homes.

Home prices are also rising steadily, and banks are lending more. Such improvements suggest that the economy is resilient enough to withstand the deep government cuts that will kick in Friday.

That's especially encouraging because uncertainty over the federal budget could persist for months.

"The stars are lining up for stronger private-sector growth this year," said Craig Alexander, chief economist at TD Bank.

Sales of new homes jumped nearly 16 percent in January to their highest level in 4 1/2 years, adding momentum to the housing recovery. Consumer confidence rose in February after three months of declines. And home prices increased in December from the same month in 2011 by the largest amount in more than six years.

The upbeat economic news contributed to a rally on Wall Street. The Dow Jones industrial average jumped more than 100 points.

Consumers still face numerous burdens. Among them is a sharp increase in gas prices. The national average for a gallon, $3.78, has surged 44 cents in a month.

And Social Security taxes rose 2 percentage points beginning Jan. 1. This year, the increase will cost a typical household that earns $50,000 about $1,000. Income taxes for the highest-earning Americans also rose.

Both factors could reduce overall spending.

On Friday, about $85 billion in automatic spending cuts are to kick in, and there's little sign that the White House and Congress will reach a budget deal to avoid them. The cuts will cause furloughs and temporary layoffs of government workers and contractors and sharply reduce spending on defense and domestic programs.

For about 2 million long-term unemployed, benefits now averaging $300 a week could shrink by about $30. Payments that subsidize clean energy, school construction and state and local public works projects could be cut. Low-income Americans seeking heating or housing aid might face longer waits.

Overall, the tax increases and spending cuts could shave up to 1.2 percentage points from growth this year, economists estimate. Alexander estimates that without the spending cuts or tax increases, the economy would expand more than 3 percent this year. Instead, he predicts growth of only 2 percent.

But growth should accelerate later this year as the effects of the government cutbacks ease, he and other economists say.

Payroll tax hike dents confidence

Florida's consumer confidence dipped slightly in February as the effect of higher payroll taxes hit workers, University of Florida researchers said Tuesday.

The monthly survey showed a one-point drop to a score of 74, better than the worst recessionary level but still shy of a score signifying a healthy economy.

Chris McCarty, director of UF's Survey Research Center in the Bureau of Economic and Business Research, predicted consumer outlook will grow even gloomier in the next survey if Congress and President Barack Obama can't avoid huge federal spending cuts.

The index is benchmarked to 1966, which means a score of 100 reflects the level of consumer satisfaction that year.

Times staff

U.S. economy showing strength as spending cuts loom 02/26/13 [Last modified: Tuesday, February 26, 2013 10:50pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. For Gov. Rick Scott, 'fighting' could mean vetoing entire state budget

    State Roundup

    Every day, Gov. Rick Scott is getting a lot of advice.

    The last time a Florida governor vetoed the education portion of the state budget was in 1983. Gov. Bob Graham blasted fellow Democrats for their “willing acceptance of mediocrity.”
  2. Potential new laws further curb Floridians' right to government in the Sunshine

    State Roundup

    TALLAHASSEE — From temporarily shielding the identities of murder witnesses to permanently sealing millions of criminal and arrest records, state lawmakers did more this spring than they have in all but one of the past 22 years to chip away at Floridians' constitutional guarantees to access government records and …

    The Legislature passed 17 new exemptions to the Sunshine Law, according to a tally by the First Amendment Foundation.
  3. Data breach exposes 469 Social Security numbers, thousands of concealed weapons holders

    Corporate

    Social Security numbers for up to 469 people and information about thousands of concealed weapons holders were exposed in a data breach at Florida the Department of Agriculture and Consumer Services. The breach, which the agency believes happened about two weeks ago, occurred in an online payments system, spokesperson …

    Commissioner of Agriculture Adam Putnam on Monday that nearly 500 people may have had their Social Security numbers obtained in a data breach in his office.
[Times file photo]

  4. Trigaux: Can Duke Energy Florida's new chief grow a business when customers use less power?

    Energy

    Let's hope Harry Sideris has a bit of Harry Houdini in him.

    Duke Energy Florida president Harry Sideris laid out his prioriities for the power company ranging from improved customer service to the use of more large-scale solar farms to provide electricity. And he acknowledged a critical challenge: People are using less electricity these days. [SCOTT KEELER   |   Times]
  5. Citigroup agrees to pay nearly $100 million fine for Mexican subsidiary

    Banking

    NEW YORK — Citigroup has agreed to pay nearly $100 million to federal authorities to settle claims that a lack of internal controls and negligence in the bank's Mexican subsidiary may have allowed customers to commit money laundering.

    Citigroup has agreed to pay nearly $100 million to federal authorities to settle claims that a lack of internal controls and negligence in the bank's Mexican subsidiary may have allowed customers to commit money laundering. 
[Associated Press file photo]