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News > Economy
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U.S. confidence surges
graphic December 28, 2001: 12:07 p.m. ET

Home sales are steady, jobless claims rise and durable goods orders slip.
By Staff Writer Mark Gongloff
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  • Credit card charge-offs near record - Dec. 26, 2001
  • Consumer is king - Dec. 19, 2001
  • Good riddance, 2001 - Dec. 17, 2001
  • Fed makes 11th rate cut of 2001 - Dec. 11, 2001
  • Unemployment highest in six years - Dec. 7, 2001
  • NBER says recession began in March - Nov. 26, 2001
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  • Confidence report
  • New home sales report
  • Existing home sales report
  • Jobless claims report
  • Durable goods report
  •  
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    NEW YORK (CNN/Money) - The U.S. economy got a wide-ranging report card Friday and performed better than expected, with consumer confidence and home sales beating economists' forecasts.

    While separate reports of higher weekly jobless claims and falling orders for long-lasting goods showed the world's largest economy is not yet out of the woods, many observers see signs that the worst may be over.

    In possibly the biggest report of the day, the Conference Board, a private research group, said its closely watched Consumer Confidence index jumped to 93.7 points in December from a revised 84.9 in November, its first gain in six months. Economists expected a reading of 83.0, according to a survey by Briefing.com.

    "Yet again, the U.S. consumer has phenomenal resilience and is not being swayed by the employment numbers coming out," said Brown Brothers Harriman economist Lara Rhame.

    Separately, sales of new homes rose 6.4 percent to an annualized rate of 934,000 units in November from a revised 878,000 unit pace in October, the Commerce Department reported. Economists surveyed by Briefing.com expected a pace of 885,000 units.

    And sales of existing homes rose 0.6 percent to an annualized rate of 5.21 million units in November, the National Association of Realtors said. Economists surveyed by Briefing.com expected sales at a 5.17-million-unit pace.

    The housing market has been the sole pillar of strength during a long-lasting slowdown in the broader U.S. economy that some economists think became a recession in March.

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    "The housing market doesn't surprise me; it's been rising all along and enabled the economy to experience only a mild recession," said Anthony Chan, chief economist at Banc One Investment Advisors.

    U.S. stocks turned mixed at mid-session, boosted in part by the data, while U.S. Treasury bond prices extended their losses.

    Earlier, the Labor Department reported that the number of Americans filing for unemployment benefits rose to 392,000 in the week ended Dec. 22 from a revised 385,000 the prior week. Economists surveyed by Briefing.com expected 400,000 new claims.

    Most economists think the unemployment rate -- which jumped to 5.7 percent in November, the highest rate in six years -- will keep rising past 6.0 percent next year, even if the economy begins to recover in the first half.

    Confirming this notion, the Labor Department said the number of continuing claims -- people drawing benefits for more than a week -- crept to 3.7 million in the week ended Dec. 15, the last week for which data are available, from 3.68 million the previous week.

    But Friday's jobless claims report was not all bad. For one thing, the four-week moving average of jobless claims, which smoothes out fluctuations in the weekly data, fell to 413,250 from 438,500 the prior week. And the number of new claims stayed below 400,000, a key level pointing to job market weakness typical of a recession, for the third straight week.

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    "These claims numbers confirm the notion that things may improve sometime in the future," Chan said. "The fact that we didn't go over 400,000 was very encouraging."

    To support consumer spending, which fuels two-thirds of the economy, despite mounting job cuts, the Federal Reserve has cut its target for short-term interest rates 11 times this year to a level not seen since 1961.

    Some combination of the Fed's efforts, lower energy prices and the United States' rapid trouncing of the Taliban and Al Qaeda forces in Afghanistan have boosted consumer confidence. The Conference Board's Expectations Index jumped to 91.5 from 77.3 in November, while the Present Situation Index rose to 96.9 from 96.2.

    "Consumers' short-term optimism is no longer at recession levels, and the upward trend signals that the economy may be close to bottoming out and that a rebound by mid-2002 is likely," said Lynn Franco, Director of The Conference Board's Consumer Research Center.

    Click here for more on the Fed and rates

    Though most economists think the United States is in recession, they also think a recovery will begin some time next year. Friday's data did little to discourage that idea.

    "We may have hit bottom here, to some extent," said Rhame of Brown Brothers Harriman. "We're facing two quarters -- the fourth of 2001 and the first of 2002 -- of close to zero growth. But this may be the first recession we've gotten through without two quarters of consecutive shrinking gross domestic product (GDP)."

    Recessions are commonly defined as two straight quarters of shrinking GDP. Though the U.S economy shrank in the third quarter, the technical definition of a recession hasn't been met yet.

    The highly regarded National Bureau of Economic Research, which defines recessions differently, recently said a recession began in March and was worsened by the Sept. 11 terror attacks.

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    The manufacturing sector has borne the brunt of the slowdown -- and the job cuts -- but another government report Friday held some rays of hope for U.S. factories.

    The Commerce Department said orders for durable goods such as cars and computers fell 4.8 percent in November after soaring a revised 12.5 percent in October. Economists surveyed by Briefing.com expected durable goods orders to fall 5.5 percent.

    But, excluding volatile transportation orders -- such as a 58 percent drop in new orders for airplanes -- durable goods actually rose 1.1 percent. Excluding defense goods, durables rose 2.7 percent.

    "Manufacturing is still mired in a deep recession, although the rate of decline may be slowing," said Steven Wood, economist at FinancialOxygen. "The rapid adjustment in reducing inventories will eventually slow and ultimately reverse, giving the factory sector a lift."

    After business spending dried up as the tech bubble burst and energy prices rose in 1999 and 2000, manufacturers found their shelves filling up with unwanted goods. Once those inventories are worked off, production -- and hiring -- can begin again. graphic

      RELATED STORIES

    Credit card charge-offs near record - Dec. 26, 2001

    Consumer is king - Dec. 19, 2001

    Good riddance, 2001 - Dec. 17, 2001

    Fed makes 11th rate cut of 2001 - Dec. 11, 2001

    Unemployment highest in six years - Dec. 7, 2001

    NBER says recession began in March - Nov. 26, 2001

      RELATED LINKS

    Confidence report

    New home sales report

    Existing home sales report

    Jobless claims report

    Durable goods report





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    Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.

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