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NewsDecember 29, 2001

NEW YORK -- A big rebound in consumer confidence and a surge in sales of homes and big-ticket items suggested Friday that the worst of the recession may be over and better days lie ahead. The Conference Board said its Consumer Confidence Index climbed in December for the first time in six months to 93.7 from 84.9 in November, the biggest monthly increase in nearly four years...

By Lisi de Bourbon, The Associated Press

NEW YORK -- A big rebound in consumer confidence and a surge in sales of homes and big-ticket items suggested Friday that the worst of the recession may be over and better days lie ahead.

The Conference Board said its Consumer Confidence Index climbed in December for the first time in six months to 93.7 from 84.9 in November, the biggest monthly increase in nearly four years.

Separately, the Commerce Department reported that new-homes sales soared 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.

Economists were encouraged, saying the reports 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."

Sense of well-being

Sohn and others said that 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.

"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 news initially sent stocks higher, but a wave of last-minute sales by investors seeking to take tax losses for 2001 reversed early gains.

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On Wall Street, the Dow Jones industrial average edged up 6 points to close at 10,137 and the Nasdaq composite average rose 11 points to 1,987.

More confidence

The Conference Board's index, based on a monthly survey of some 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. The surge was the biggest jump since February 1998, when the index rose 9.1 points from the previous month to 137.4.

That far higher figure for consumer confidence lends some perspective to the current state of the economy.

"We're not out of the woods yet," Sohn said. "Historically the level is still low."

Furthermore, many companies have yet to release their fourth-quarter earnings, which are widely expected to be weak.

"There's a good chance we've seen the lion's share of economic problems, but we haven't turned the corner," said Gary Thayer, chief economist at A.G. Edwards & Sons Inc. in St. Louis.

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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