Associated Press
NEW YORK — A rebound in consumer confidence and surge in sales of homes and big-ticket consumer goods led a series of economic reports Friday that suggest the worst of the recession may be over and better days lie ahead.
The New York-based Conference Board said its Consumer Confidence Index climbed in December for the first time in six months to 93.7 from a revised 84.9 in November, the biggest monthly increase in nearly four years.
Separately Friday, the Commerce Department reported that new-homes sales soared by 6.4 percent in November, the largest increase in almost a year, helped out by mild weather and low mortgage rates.
The Commerce Department also said orders for many big-ticket items, including appliances, autos and electronic equipment, posted solid gains in November.
The news initially sent key stock indexes higher, but a wave of last-minute sales by investors seeking to take tax losses for 2001 reversed early gains. In afternoon trading on Wall Street, the Dow Jones industrial average edged up 4 points to 10,135 and the Nasdaq composite average rose 12 points to 1,988.
Still, economists were encouraged by the reports, saying they indicate a recovery could come as early as next year.
"Consumers are once again feeling better and will become the locomotive pulling the economy out of the current recession," said Sung Won Sohn, chief economist at Wells Fargo &Co. "What’s amazing to me is really how resilient the American economy and consumers have been. Frankly, after the terrorist attacks, most of us had expected much worse."
Success in the war in Afghanistan, rebounding stock prices, the steady drop in interest rates over the past year and optimism that employers have put their heaviest job cuts behind them contributed to Americans’ improved sense of well-being, Sohn and others said.
The Federal Reserve, in an effort to revive the economy, has trimmed interest rates 11 times this year. The central bank hopes the reductions will prompt consumers to spend and businesses to invest.
"The deterioration in current economic conditions appears to be reaching a plateau, led by a stabilizing employment scenario," said Lynn Franco, director of the Conference Board’s research center.
The Conference Board’s index, based on a monthly survey of about 5,000 U.S. households, is closely watched because consumer confidence heavily influences consumer spending, which accounts for about two-thirds of the nation’s economic activity.
The index compares results to its base year, 1985, when it stood at 100. The November figure was the lowest since January 1994, when the index reached 82.6, Franco said.
The surge was the biggest jump since February 1998, when the index rose 9.1 points from the previous month to 137.4, the industry group said.
That figure lends some perspective to the current state of the economy.
"We’re not out of the woods yet," Sohn said. "Historically the (consumer confidence) level is still low."
Furthermore, many companies have yet to release their fourth-quarter earnings, which are widely expected to be weak, said Gary Thayer, chief economist at A.G. Edwards &Sons Inc. in St. Louis.
"Some companies will want to trim employment costs more, but they’ve gone through a lot already," he said. "There’s a good chance we’ve seen the lion’s share of economic problems but we haven’t turned the corner."
Although a big drop in demand for military planes pushed down orders for costly manufactured goods last month by 4.8 percent, many other big-ticket items posted gains, the Commerce Department said. November saw a 57.9 percent drop in new orders for airplanes, mostly stemming from slackened demand for defense aircraft and parts, the government said.
That masked gains elsewhere.
Excluding the volatile transportation category, which can swing widely from month to month, durable-goods orders rose a solid 1.1 percent, the first back-to-back increase since November-December 1999.
Another report by the Labor Department said new claims for unemployment insurance rose last week by a seasonally adjusted 7,000 to 392,000.
"The slew of data all paint a complimentary picture of at least some rebounding," said Stuart Hoffman, chief economist for PNC Financial Services Group. "The data don’t say the recession ended in November and December, but there are some precursors for an end to the recession in the winter."
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