Economic outlook still good, experts say

By Barbara Hagenbaugh
USA Today

WASHINGTON — The U.S. economy lost some steam at the end of the year but still appears to be on solid footing heading into 2004, according to a trio of reports released yesterday.

U.S. consumer confidence and Chicago-area growth in manufacturing activity softened in December, while sales of previously owned homes fell in November.

But despite the declines, activity was still at elevated levels that suggest the economy is improving from the lackluster pace seen during much of the past three years.

"Even though we lost some momentum at the end of the year, it still looks like 2004 is going to be a very good year," says Steven Wood, president of Insight Economics.

The reports:

• Confidence. The consumer confidence index fell 1.2 points to 91.3 in December, the private Conference Board said. Despite the drop, confidence was the second-highest of any month in 2003 and was up 13 percent from December 2002.

The index was dragged down by nervousness about the job market. Almost one-third of the consumers surveyed said jobs were hard to get, up 3 points from November. Some economists said that called into question predictions that the job market was improving strongly.

"One of the challenges we have going into 2004 is again the economy seems to be doing well, but the job market is very much weaker than what we are used to (at this point) in a business cycle," says John Silvia, chief economist at Wachovia.

• Housing. Sales of previously owned homes fell 4.6 percent to a seasonally adjusted annual rate of 6.06 million in November, the National Association of Realtors said. But sales were still the fifth-highest on record and were up 6.9 percent from a year ago. The median sales price was $170,900 in November, down $900 from October but up $9,500 from November 2002.

• Manufacturing. Manufacturing growth in the Chicago area eased in December as production and new orders slowed, the National Association of Purchasing Management-Chicago said. The group's index of factory activity fell to a seasonally adjusted 59.2 in December from 64.1 in November. Numbers above 50 suggest expansion.