Reports show consumers still economy's lifeline

NEW YORK -- The threat of war with Iraq contributed to the second straight monthly drop in U.S. consumer confidence.

The Conference Board's Consumer Confidence Index slipped in January to 79 from 80.7 in December. The index is based on a survey of 5,000 U.S. households and is calculated from a base of 100 in 1985.

"Overall readings continue to reflect the country's lackluster economic activity," said Lynn Franco, director of the Conference Board's Consumer Research Center. "Now, with the threat of war looming, consumers have grown increasingly cautious about the short-term outlook."

Separately, the Commerce Department reported that sales of new single-family homes rose in December to their highest level since the government began keeping track in 1963. With mortgage rates at some of their lowest levels in decades, new home sales reached a seasonally adjusted annual level of 1.08 million.

"In times of uncertainty, people still want a home and the home front is helping keep the economy moving forward," said Oscar Gonzalez, an economist at John Hancock Financial Services in Boston.

U.S. manufacturing, however, is limping. New orders to U.S. factories for big-ticket goods -- also known as durable goods -- rose a paltry 0.2 percent in December, the Commerce Department said. Economists were expecting an increase of 1 percent.

"The manufacturing sector is deep in the dumps, and this report gives little hope of improvement," Gonzalez said.

On Wall Street, the Dow closed up 99.28 points at 8,088.84, its biggest advance in more than two weeks. The rise was attributed to better-than-expected earnings as well as bargain-hunting after the market's recent slide.

On Monday, the Dow slipped below the 8,000 mark for the first time in three months.

In the consumer confidence survey, consumers expressed more worries about the job front in the next six months, and fewer people said they plan to buy a car or major appliance.

"There's no doubt the uncertainties about geopolitical events weigh on people's minds," said Josh Feinman, chief economist with Deutsche Asset Management in New York. "Is there going to be a war? Certainly, that's contributing to people's anxiety."

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