- The Washington Times - Wednesday, November 27, 2002

Consumer confidence rebounded in November after sinking to a nine-year low a month earlier, raising hopes that personal spending would be strong enough this holiday shopping season to help bolster the economy.
Other reports yesterday also suggested the nation could get through its rough patch without sliding into a new recession: The economy grew more briskly in the summer than previously thought, and while new-home sales slowed in October, they still posted the third-best month on record.
"This is a Rodney Dangerfield economy it's not getting any respect," said Ken Mayland, president of ClearView Economics. "In fact, the economy is doing better than it is getting credit for."
The latest batch of news indicated that consumers the main force sustaining the economy this year would keep their pocketbooks and wallets open wide enough to prevent the recovery from fizzling, economists said.
"Shell-shocked consumers paused for a while in the fall, but now they are feeling better," said Sung Won Sohn, chief economist at Wells Fargo. "The confidence report points to a decent holiday shopping season. I don't think consumers will turn out to be the Scrooges that many feared."
Consumer confidence, after sagging for five months, rose in November, lifted by improved expectations about employment and income, the Conference Board said. The private research group's Consumer Confidence Index jumped to 84.1 from a nine-year low of 79.6 in October.
While that heartened economists, Wall Street was disappointed because November's showing was weaker than the reading of 85 that analysts were expecting. That helped send stocks sharply lower. The Dow Jones industrials declined 173 points to finish at 8,776, while the Nasdaq Composite Index fell 37 points to 1,444.
With consumers in better spirits and a refinancing boom providing many with extra cash, "the holiday shopping season might come in on the strong side of expectations," said Merrill Lynch economist Gerald Cohen.
Separately, gross domestic product, considered the best barometer of the nation's economic health, grew at a 4 percent annual rate in the July to September quarter, faster than the 3.1 percent growth rate estimated a month ago, the Commerce Department said.
Stronger inventory building by businesses, more robust spending by the government and an improved trade picture were the major reasons behind the upward boost to third-quarter GDP.
GDP measures the total value of goods and services produced within the United States. The revised reading, based on more complete data, exceeded the 3.8 percent pace analysts were forecasting.
While the economy roared like a lion in the summer and in the first three months of this year, when it grew at a 5 percent rate, it slept like a lamb in the spring, growing at a mediocre 1.3 percent rate.
Even with the third-quarter bounce, analysts believe the economy pounded by the turbulent stock market and worries about a war with Iraq is losing momentum in the October to December quarter.
Forecasters at the National Association for Business Economics are predicting a 1.4 percent growth rate in the current quarter.
A big part of the expected slowdown, economists say, will reflect weaker auto sales. Brisk auto sales gave a boost to third-quarter GDP.
The uneven growth is a source of apprehension for the Federal Reserve and President Bush, whose team is pondering what more can be done to energize an economy knocked down by last year's recession.
The Federal Reserve wanting to boost economic growth cut a key interest rate this month by a bold half-percentage point, its first rate reduction this year.
In a third report, new-home sales fell by 4.5 percent in October from the previous month to a seasonally adjusted annual rate of 1.01 million, the Commerce Department said. But even with the decline, October's sales pace marked the third-best monthly level on record.
Economists expected sales to slow from September's all-time high monthly sales pace of 1.05 million, which represented a 1.6 percent increase from the previous month and was powered by low mortgage rates.
In another encouraging sign, the GDP report also showed that after-tax profits of U.S. corporations grew at a 2.1 percent rate in the third quarter, up from a 1.7 percent pace in the second quarter.
Economists say businesses are more likely to increase capital investment a crucial ingredient to the economy's return to full health once profits recover from a hit during the recession.
"We are on the stepping stones toward firmer economic ground, which we hopefully will see next year," Mr. Sohn said.


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