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Economy Sees Good Ending to 2006

January 2, 2007

Ending the year on a good note, the U.S. economy saw consumer confidence soar in December, with reports that the downturn in the housing market might be over, reported the Associated Press.

The Conference Board reported last Thursday that consumer confidence hit an eight-month high of 109 in December, slightly below last April’s 109.8 – when confidence hit its highest point in four years.

The National Association of Realtors also presented a brighter economic picture in the housing market, reporting that sales of existing homes edged up 0.6 percent in November to a seasonally adjusted annual rate of 6.28 million units. The news comes after a 0.5 percent rise in sales in October. The report marked the first back-to-back increases in sales of existing homes since the spring of 2005 and followed news last week that sales of new homes rose 3.4 percent in November.

Although the better-than-expected news could signal the end of the severe slide in the housing market, analysts cautioned not to expect a sharp rebound.

Hosing had been the economy’s best performer as the lowest mortgage rates in four decades gave the country five straight years of record sales. Sales of existing homes are expected to fall by about 9 percent with a smaller 1-percent decline expected in 2007.

Other economists cautioned that while they believe the housing market hit bottom, it could see a prolonged period of weakness that will last for much of next year.

The rise in consumer confidence was a good sign that the housing slowdown was not more seriously affecting consumers’ willingness to spend money, analysts said, as the fear had been that the severe slump would cause people to stop spending and possibly contribute to an outright recession.

Some analysts said, however, more increases in consumer confidence are needed before anyone can safely say that fears of a recession are over.

There was also good news coming out of the Labor Department last week, as it reported that the number of laid off workers filing applications for unemployment benefits rose only 1,000 last week to 317,000 – a indication that the job market remains strong, said analysts.

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