- The Washington Times - Thursday, December 23, 2004


America’s consumers came off a buying binge and were somewhat less jolly spenders in November. New-home sales, meanwhile, cooled from a record high, while demand for big-ticket manufactured goods rebounded.

The latest batch of economic reports released yesterday, though sending slightly mixed signals, still painted a picture of a modestly growing economy, analysts said.

“Tie a bow around it — I’ll take it home,” said Ken Mayland, president of ClearView Economics. “All the reports are indicative of a healthy economy.”

Analysts said they are still expecting respectable economic growth in the current October-to-December quarter, with estimates ranging from a 3.5 percent pace to topping a 4 percent pace.

Yesterday’s reports “are telling us this is still a gradual economic expansion that is not bursting at the seams,” said Anthony Chan, senior economist at JP Morgan Fleming Asset Management.

A Commerce Department report showed that consumers boosted spending by a modest 0.2 percent in November, compared with a brisk 0.8 percent rise in October — the biggest since July.

Incomes grew by 0.3 percent in November, down from a 0.6 percent rise the previous month.

Although consumers are still in good shape, high energy prices and a still-recovering jobs market are making some, notably low- and middle-income Americans, more cautious spenders, analysts said. Consumer spending accounts for roughly two-thirds of all economic activity and is closely watched by economists.

The spending and income figures are not adjusted for price changes.

When adjusted for inflation, consumer spending in November was flat, compared with a solid 0.4 percent rise in October.

The University of Michigan said yesterday that consumers’ attitudes on the economy improved in December.

The consumer sentiment index rose to 97.1 from 92.8 in November.

Another report from the Commerce Department said that new-home sales plunged by 12 percent in November from the previous month — the biggest drop since January 1994.

The decline left sales at a seasonally adjusted annual rate of 1.13 million units and could be a sign that the high-flying housing market is losing altitude.

The sharp drop came after a record-high pace of 1.28 million units sold in October, according to revised figures. That pace, analysts said, was just too brisk to be maintained. While surprised by the steepness of November’s decline, economists weren’t overly concerned.

“Given everything else that we think we know about the market, I’m not going to lay awake worrying about this one,” said David Seiders, chief economist at the National Association of Home Builders. Economists believe 2005 will see less lofty but still solid home sales, assuming mortgage rates remain well behaved.

Home prices, which have been soaring, settled down in November. The median sales price of a new home — half sell for more and half for less — was $206,300, the lowest since December 2003.

In a third Commerce Department report, orders to U.S. factories for big-ticket manufactured goods bounced back in November, rising by 1.6 percent. That marked an improvement from October’s 0.9 percent decline.

“Though there’s certainly much work to do in the new year to make sure our recovery and expansion continue, this is a great way to end the year,” said John Engler, president of the National Association of Manufacturers.

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