US consumer confidence unexpectedly surged in December as Americans started to put the trauma of Sept. 11 behind them, suggesting they may lift the country out of recession by the middle of next year.
The Conference Board's index of consumer attitudes toward the economy increased to 93.7 in December from 84.9 in November, as home sales surged, layoffs slowed, and orders for many durable goods rose. All point to an economy rebounding from the first contraction since 1991.
"Americans aren't going to go a long period of time without getting back to their old ways, and that's spend, spend, spend," said Marc Griffith, 37, owner of Puttin' on the Glitz, a women's accessories shop in Atlanta. While a drop in tourism hurt sales after Sept. 11, they picked up during the holidays.
The increase of 8.8 points in the confidence index, the largest since February 1998, drove up shares of companies as diverse as General Motors Corp, Alcoa Inc and American Express Co rose. Bonds fell, pushing up yields, amid expectations the rebound will limit future rate cuts by Federal Reserve policy makers.
Combined sales of US new and previously owned homes surged in November to a level that suggests this year will be a record year for the housing industry.
Sales of existing homes unexpectedly rose 0.6 percent last month to an annual pace of 5.21 million units from a revised 5.18 million-unit rate in October, the National Association of Realtors said. New home sales rose 6.4 percent to a rate of 934,000, the fastest since March, the Commerce Department said.
If the total pace of 6.14 million houses is sustained this month, the year's sales will break the record 6.09 million in 1999. That will be a boon to the economy as it returns to growth.
Weekly numbers on unemployment insurance reinforce that the rising tide of layoffs may have ebbed. State unemployment offices received 392,000 initial claims for jobless benefits last week, compared with a nine-year high of 535,000 at the close of September, the Labor Department reported.
Orders for durable goods fell 4.8 percent in November after rising 12.5 percent a month earlier, the Commerce Department reported. Orders excluding the volatile category of transportation equipment rose 1.1 percent after rising 2.9 percent in October, the first back-to-back gains in almost two years.
The gains did little for Chicago-area manufacturers. The National Association of Purchasing Management-Chicago said its December factory index rose to 41.4 this month, still low enough to suggest contraction, from 41.1 in November.
The Treasury's 5 percent note that matures in August 2011 fell more than 1/4 point, pushing up its yield 4 basis points to 5.10 percent.
Analysts had expected the Conference Board's confidence index to rise to 83 this month from November's previously reported 82.2 reading, based on the median of 37 forecasts in a Bloomberg News survey.
The index is the second to show an increase for this month.
The University of Michigan's index of consumer sentiment rose to a four-month high.
"Consumers' short-term optimism is no longer at recession levels," said Lynn Franco, director of the New York-based Conference Board's Consumer Research Center. "The upward trend signals that the economy may be close to bottoming out and that a rebound by mid-2002 is likely."
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