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Friday, 28 December, 2001, 15:14 GMT
US consumer optimism returns
US consumer sentiment has improved for its first time in six months, as ever more Americans looked forward to an end to the recession, a key report has shown.

Consumer confidence as measured by the Conference Board, a business research group, surged to an index rating of 93.7 this month.

The rise far outstripped the expectations of Wall Street analysts, who had expected a reading of 83.

And it followed sharp falls in the previous three months, as the recession and after-affects of the 11 September attacks weighed on sentiment.

A separate report hinting at a revival in big-ticket manufactured goods, outside the aerospace sector, also cheered economists searching for signs of America's first recession for a decade.

"It's a big economic day," said Bancorp Piper Jaffray market strategist, Brian Belski.

"People are looking for evidence that the economy is solidifying."

Job security

Conference Board chief Lynn Franco credited an improving jobs market for much of the recovery in sentiment.

"The deterioration in economic conditions appears to be reaching a plateau, let by a stabilizing employment scenario," Ms Franco said.

"Consumers' short-term optimism is no longer at recession levels, and the upward trend signals that the economy may be close to bottoming out and that a rebound by mid-2002 is likely."

The report received a cautious welcome on Wall Street.

"I'm pretty encouraged by the confidence numbers," said Gary Thayer, chief US economist at AG Edwards and Sons.

"That bodes well for the future."

Factory revival?

Separate Commerce Department figures on Friday revealed that while orders for big-ticket goods fell by 4.8% last month, the decline masked recovery in sectors outside aerospace.

Excluding transport and defence, orders rose in November for the second month in a row, the figures revealed.

"Manufacturing, outside of defence, was positive for November, so the recovery story that's been driving the market off its bottom seems to be intact," said Benjamin Pace, managing director at Deutsche Bank Private Banking.

Meanwhile, first-time jobless claims are rising slower than expected, up to 392,000 during the last week before Christmas from 385,000 during the previous week.

Economists had expected there to be 401,000 new claims.

"We've probably bottomed in this market and this economy, and 2002 should be pretty good," Mr Pace said.

Downbeat report

But a report showing sentiment among Chicago purchasing managers had only inched higher to an index reading of 41.4, from 41.1 in November, dampened celebrations.

The figure compared with a 44.7 reading predicted by economists.

"It's a discouraging report," said Dana Johnson, head of research for Banc One Capital Markets.

"You would have expected a bounce. I'm surprised that it held at such a low level."

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Key players

See also:

21 Dec 01 | Business
US economy continues to stutter
17 Dec 01 | Business
New York's economy shrinks
12 Dec 01 | Business
False starts for US economy optimism
30 Nov 01 | Business
US economy shrinks fast
26 Nov 01 | Business
US officially enters recession
18 Nov 01 | Business
US recession raises global fears
26 Sep 01 | Business
US economy in freefall
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