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Orders for durable goods rebound

Rising consumer index bodes well for the economy

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WASHINGTON — Orders to U.S. factories for costly goods rose a bigger-than-expected 2 percent in December while a key gauge of consumer confidence improved in January for a second straight month. The reports suggested better days may be ahead for the battered economy.

The New York-based Conference Board reported Tuesday that its Consumer Confidence Index rose to 97.3 in January. The surprisingly strong gain followed an increase in December to 94.6.

The increase was propelled by sentiment that the business outlook and job prospects were going to get better.

"While the economy has not turned around yet, the worst may well be over," said Conference Board research director Lynn Franco.

The Commerce Department said the December rebound in orders for durable goods, items expected to last at least three years, followed a steep 6 percent decline in November.

The gain in orders was better than the 1.5 percent increase many analysts had been expecting.

Manufacturers have borne the brunt of the ailing national economy, which slid into a recession in March. To cope, they have sharply cut production, trimmed hours and laid off workers. Last year, factories shed 1.3 million jobs, or about 7 percent of their work force.

As evidence of just how much damage has been inflicted on the manufacturing sector, the department said that for all of 2001 durable-goods orders fell by a record 13.2 percent, the worst showing since the government began keeping records using the current classification system in 1992. In 2000, orders rose by 6.7 percent.

Tuesday's report and other recent data suggest the recession in the manufacturing sector may be bottoming out, economists say.

A report released by the Institute for Supply Management earlier this month showed that a rise in new orders to factories helped push a key gauge of manufacturing activity higher in December, a sign the sector is beginning to emerge from a 17-month slump.

Before manufacturing can fully recover, however, businesses will have to crank up investment again and foreign companies and consumers must increase their spending on American-made goods, which would boost U.S. exports, economists say.

To revive the economy, the Federal Reserve cut interest rates 11 times last year, which had the effect of reducing the prime lending rate, a benchmark for many consumer and business loans, to its lowest level since November 1965.

Fed Chairman Alan Greenspan told Congress last week that he see signs of a recovery, prompting many analysts to predict that Fed policymakers will leave interest rates unchanged after a two-day meeting that ends Wednesday.