Originally created 11/29/06

Reports show robust holiday sales unlikely



NEW YORK - Three pillars of the economy - consumer confidence, orders for manufactured goods and home prices - showed surprising cracks Tuesday, flashing signals that growth may slow more heading into the important holiday shopping season.

The New York-based Conference Board said its widely watched consumer confidence index fell to 102.9 in November from a revised reading of 105.1 in October. November's figure was the lowest since August's 100.2 and well below economists' expectations of a 106 reading.

That news arrived on the heels of a government report on durable goods that showed orders for big-ticket manufactured goods plunged 8.3 percent in October - the largest drop in more than six years.

And the median price of a home dropped to $221,000 in October, a decline of 3.5 percent from a year ago, according to the National Association of Realtors. It was the biggest year-over-year price decline on record for an asset that many Americans use as a gauge of their financial well-being.

The reports drew some air out of any inflated hopes for a robust holiday shopping season. Economists still believe it will be a decent season, however, because of lower gasoline prices, which have put more money in consumers' pockets. Prices at the pump have dropped 80 cents a gallon, on average, since the start of August.

Consumers "are not feeling really good now," said Gary Thayer, chief economist at A.G. Edwards & Sons Inc., though he added they're feeling better compared to this past summer when gasoline prices surged.

"We are still positive on the consumer sector. I think it will be a good holiday season," he noted.

Some of the weaker-than-expected economic news, namely the durable goods and consumer confidence reports, boosted Treasury prices and knocked down yields.

The 10-year Treasury yield fell below 4.50 percent for the first time since late January on expectations that a slowing economy might force the Federal Reserve, which has left interest rates intact since August, to begin lowering interest rates next year.

"A tighter labor market and a more guarded short-term outlook have combined to curb consumers' confidence in November," said Lynn Franco, the director of The Conference Board Consumer Research Center, in a statement. But she added that despite the retreat, "the overall level of confidence remains favorable and continues to suggest that the economy will expand throughout the first half of next year."

COUNTING ON YOU TO SPEND


Merchants are counting on confident shoppers to keep spending through the holiday season, but worries about job security could make them scour for bargains at the malls and department stores.


High-profile layoffs in the auto industry and steep cutbacks in home building have made consumers uneasy about the labor market, even though government reports have painted a healthy picture for jobs.


The drop in durable orders also provided more evidence that the nation's factories are beginning to feel the impact of the slowdown in the overall economy and could derail any gains made in the employment market.


- Associated Press