Signs of recovery bring cheer in US

IN A fresh sign that the United States has emerged decisively from recession, the National Association of Realtors reported yesterday that sales of existing homes surged in November to the highest level in six years.

Its report coincided with the latest news on consumer sentiment from the US Conference Board, which showed confidence soaring in December. The board's index jumped to 78.3 per cent, compared with 65.6 per cent in November, the best level since April 1991.

A separate poll of consumers in the US and Japan showed growing optimism among Americans in contrast to deepening pessimism in the Japanese population. Half of those polled in the US saw the economy improving under the incoming Clinton administration.

These latest signs of recovery come on top of a Christmas retail season that in most parts of the country brought in the best performance for several years. Holiday sales in many regions, particularly the Midwest and South-east, were up by as much as 10 per cent over 1991.

The cheerful economic news helped boost the dollar in quiet post-Christmas trade. The currency was also helped by renewed tension in the Middle East. Despite glimmers of economic hope in Britain, the pound ended more than three cents down on its Christmas Eve close against the dollar at dollars 1.5032. The dollar gained nearly three pfennigs against the mark to finish at DM1.6210.

The pound closed slightly lower against the mark, shedding half a point overall against a basket of other currencies to close at 79 per cent of its 1985 value.

The Realtors report registered a 5.8 per cent spurt in homes sales in November, which would translate into an annual sale volume of 3.85 million units - higher than had been predicted by Wall Street and the largest turnover since December 1986.

The home-sales figures were seen as another reflection of growing confidence among prospective buyers about their economic security. The jump was also attributed to a combination of relatively low prices in most regions and modest interest and mortgage rates.

'Many decided to buy after seeing a spike in interest rates during a time of economic recovery,' William Chee, president of the Realtors' Association, said. 'This release of pent-up demand shows consumers are closely watching the market to guage the best time to buy.'

However, many economists still warn against overstating the strength of the recovery. Few expect the economic growth rate of 3.4 per cent recorded in this year's third quarter to be sustained. Nor is there much optimism that serious inroads can be made into unemployment, now at 7.2 per cent, especially if growth goes below the 3 per cent mark.

'It is like a muddy game of British soccer with lots of play in the mid-field and neither side managing to score a goal,' Roger Kubarych, a Wall Street money manager, said yesterday. 'And there are still at least as many minuses on the field as there are pluses.' He cited as negative factors contraction in the defence and financial industries and global overcapacity in the car industry.

This week, 50 economic forecasters polled by the Blue Chip Economic Indicators predicted that economic growth would again dip below 3 per cent in 1993. That would encourge Bill Clinton to implement at least a modest fiscal stimulus programme, as promised during his election campaign.

But the Conference Board described the 24-point gain in its confidence index last month as 'imposing'. A spokesman added: 'An increase of such a dimension in so brief a time generally foreshadows significant improvement in the nation's economic performance.' The survey none the less detected continuing concern about the scarcity of jobs.

The US-Japan poll, conducted by the New York Times and CBS in conjunction with Tokyo Broadcasting, showed a confidence reversal between the two countries. Whereas a similar survey a year ago showed confidence much higher among Japanese, the opposite is apparently true now.

More Americans than Japanese think their country will be the world's number one economy in the 21st century, and while 29 per cent of Americans saw their economy improving, only 6 per cent of Japanese did.