Wednesday, June 27, 2001
Economy showing signs of life
Consumer confidence, demand up
By Jeannine Aversa
The Associated Press
WASHINGTON Poking through dark economic clouds, three reports Tuesday provided some sunshine: Consumer confidence climbed to the highest level of the year, demand for big-ticket goods jumped and new-home sales were up.
The economy is clearly coming out of hibernation and beginning to move about, said Sung Won Sohn, chief economist at Wells Fargo. But it's still pretty dark in the woods.
The government reports came as the Federal Reserve's Open Market Committee, which has reduced interest rates five times this year, began a two-day session that many analysts expect will result in a sixth rate cut today.
While economists were still divided on whether the reduction will be by another half-point or a quarter-point, some analysts thought that Tuesday's reports bolstered the case for a more moderate move and complicated the Fed's decision-making.
Consumer confidence rose in June for the second straight month, the New York-based Conference Board said. Its index of 117.9 was a better showing than many analysts were predicting and followed a revised 116.1 in May. Still, it was well below the year-ago level of 139.2.
Households seemed to have turned the corner on their outlook for the future, said economist Joel Naroff of Naroff Economic Advisors.
Another report showed an increased appetite among consumers and businesses for a wide variety of costly manufactured goods.
Orders for durable goods items expected to last at least three years jumped by a bigger-than-expected 2.9 percent in May, after a 5.5 percent drop the month before.
The report provided a bright spot for manufacturers, which many believe have been suffering through their own recession.
National Association of Manufacturers President Jerry Jasinowski said the figures were like a ray of sunshine in an otherwise stormy sky. He said that while I don't think the clouds are going to fade right away, the numbers show that the storm is beginning to moderate.
One part of the economy that has held up well during the slowdown is housing, bolstered in large part by low mortgage rates. That strength is another main reason why the economy hasn't tanked.
In a third report, new-home sales rose a solid 0.8 percent in May to a seasonally adjusted annual rate of 928,000, after a revised 4.5 percent decline the month before. Sales rose in all parts of the country, except for the Northeast, where they fell.
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