Signs that US economy may avert a 'double dip'

For months the economy has had some kind of cloud hanging over it.

The stock market was in the dumps, red-faced corporate executives were in hiding, and consumers – watching all this unfold – were starting to wonder about the future. The economic talk was about a return to recessionary times.

Now there's some sunshine mixed in with the clouds. The stock market has risen for five straight weeks, thanks to bargain hunting and a change in psychology. There hasn't been a CEO-in-handcuffs sighting for a few weeks. On Monday, the government reported that consumers are taking advantage of lower interest rates to snap up new houses at a record pace. And Tuesday the Commerce Department reported that orders for durable goods – costly items like computers and cars – jumped 8.7 percent, the largest increase in 9 months.

Although economists caution about reading too much into a short time span, it may mean the prospect of a "double-dip" recession is fading. At the very least, the let-up in bad news, suggests that the economy is not getting any worse.

"We're probably at the testing point," says John Silvia, chief economist at Wachovia Securities in Charlotte, N.C. "The economy turned up a few quarters ago, but it's had no strength to it."

One sign of that came yesterday when the Conference Board, a business research organization, reported that its August consumer confidence survey of 5,000 households dipped more sharply than most economists expected. The index fell to 93.5 from 97.4 in July.

Lynn Franco, the director of the Conference Board's Consumer Research Center, said the decline showed that business conditions had yet to turn around and consumer spending is not likely to help the economy in the near term.

Still, given the better stock market and improved economic news, economists a consumer survey later this month by the University of Michigan to move up. Even earlier this month, a Christian Science Monitor/TIPP poll showed a small uptick in its index of US economic confidence.

In fact, despite what consumers are saying in the surveys, they remain keen buyers of houses and automobiles, items whose sales depend in part on interest rates.

In the case of homes, mortgage rates – at below 6.25 percent – are now at their lowest level since the 1960s. Last month, new-home sales rose 6.7 percent to their highest monthly level ever.

"It's a combination of stunning good finance and solid increases in house values," says David Seiders, chief economist for the National Association of Home Builders in Washington, D.C.

For example, on Monday, the National Association of Realtors (NAR) reported that the price of the average house in the US was up 9.2 percent from last year and 18.1 percent from the year before.

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