It seems that the upsurge in interest rates in recent weeks got the attention of heretofore undecided potential home buyers.

The National Association of Home Builders (NAHB) reported today that its March Housing Market Index (HMI) jumped upward by an all-time record 10 points. After hovering around 50 for the past four months the HMI leaped to 60, the highest reading since May 1994.

The HMI is constructed from three sub-indexes that measure current single-family home sales, expected home sales during the coming six months, and prospective buyer traffic at new home sites. Each month for the past 15 years the NAHB has polled its membership for data on these three indicators. A score of 50 means that about the same number of respondents reported good or poor conditions. From February to March the current sales index advanced from 52 to 63, the projected sales index edged up from 60 to 65, and the traffic index rose from 39 to 51.

The fact that the actual sales index made a solid gain from 52 to 63 seems to indicate that, at least in the February-to-March timeframe, there has been a resurgence in the housing industry. It's interesting that it took the perceived threat of higher interest rates to attract buyers into the market.

Also today, the National Association of Manufacturers (NAM) released the results of a recent survey of members' outlook and plans for 1996.

The decline in employment in the manufacturing sector has been in the news for the past several months. But, today's results revealed that 30 percent of the survey respondents believed that in 1996 they would increase the number of full-time permanent employees. 55 percent said they would not reduce their workforces, and 11 percent said that they would.

Almost 2 out of 3 of the respondents expected that they would increase employee wages in 1996. The estimated increases varied between 2.6 and 4 percent.

The 1995 slowdown in economic activity caused manufacturers to become increasingly burdened with inventories of unsold goods. 63 percent of the survey participants expected that their inventory levels would hold more-or-less constant during the year. But, 10 percent reported that they actually planned to increase inventories.

41 percent of those polled expected the economy to grow between 2 and 2.5 percent. But, 29 percent expected less than 2 percent growth. 70 percent expected inflation to stay between 2 and 3 percent.

More than three out of four of the manufacturing concerns wanted the Fed to lower interest rates again, and two out of three of those desiring a cut thought it should be at least 1/2 percent.

Summing up: The NAM members anticipate more of the same: slow economic growth and a continuation of a constant, modest rate of inflation. Within that environment they believe that, on balance, manufacturing employment and wages could rise. By a large majority, the survey respondents feel that additional economic stimulus in the form of a further lowering of interest rates is essential.

Byline: Lafferty (MF Merlin)