- The Washington Times - Thursday, November 28, 2002

The economy appears to be emerging from its late-summer funk, easing concerns about a possible double-dip recession.
In a pre-Thanksgiving blizzard of reports, the government said yesterday that new claims for unemployment benefits fell to a 21-month low last week. Consumer spending in October shot up at the fastest clip in three months, and orders to U.S. factories for big-ticket durable goods increased for the first time in three months.
And the Federal Reserve found slightly stronger business activity in its latest nationwide survey, reporting scattered signs of improvement in late October and early November.
Those reports followed news earlier this week that consumer confidence, which had been falling for five straight months, rose in November and the overall economy grew at a robust 4 percent rate in the July-September period, a big revision from the initial estimate of 3.1 percent growth.
Taken together, analysts said the string of better-than-expected reports pointed to a gradual rebound from what Federal Reserve Chairman Alan Greenspan had termed a "soft patch" for the economy.
"We are coming out of the soft patch and stepping on firmer ground," said Sung Won Sohn, chief economist at Wells Fargo in Minneapolis. "I am reasonably sure we have avoided a double-dip recession."
The Commerce Department said consumer spending rose by 0.4 percent last month, compared with activity in September, led by stronger demand for nondurable goods such as clothes and food. It was the biggest increase in three months.
"Consumers hit the malls with a vengeance in October," said Joel Naroff of Naroff Economic Advisors. "While vehicle sales may have cooled, consumers' desires for everything else haven't."
Part of the reason for optimism about future consumer spending, which has been the driving force in the recovery, is a firming labor market. The Labor Department said that new claims for unemployment benefits fell by 17,000 last week to 364,000, the lowest in 21 months.
As layoffs slacken and job growth improves, economists predicted stronger income gains in the months ahead, giving Americans the power to keep spending. The Commerce report on spending found that incomes rose by only 0.1 percent in October. But with the help of last year's tax cut, disposable income the amount left after taxes are paid rose by a stronger 0.2 percent.
The Fed's business survey, known as the "beige book" for the color of its cover, struck a decidedly more positive tone about business conditions in early November than the previous report, which had depicted a recovery in danger of stalling out.
The factory-orders report showed a 2.8 percent rise in demand for durable goods, items expected to last at least three years, after two straight months of declines.
Analysts said the strength shown in recent economic reports was likely to persuade the central bank to keep rates unchanged when it holds its last meeting of the year on Dec. 10.

The October gain demonstrated widespread strength across a number of sectors, with demand for metals, machinery, motor vehicles and communication equipment all posting solid increases. Orders for communication equipment led the advance with a 65.2 percent surge, the largest gain since January 1997.
The 0.4 percent increase in consumer spending in October was the biggest jump since a 1.1 percent surge in July, which had been powered by strong auto sales. In October, spending on nondurable goods rose by 0.7 percent while spending on durable goods, the category that includes cars, dropped by 1 percent.
A reduction in spending on cars was a big factor behind the drop in spending on durable goods in both September and October. Analysts believe further weakness in this sector will keep overall economic growth at a 2 percent rate or less in the October-December quarter.
The nation's personal-savings rate savings as a percentage of after-tax income dipped to 4.2 percent in October from 4.4 percent in September, reflecting the fact that spending outpaced income growth for the month.

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