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This Week's Economic Roundup

Consumer confidence hits highest level in six years; personal income and spending rise.
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While a brighter outlook on jobs and the economy had consumers in a better mood last month, small-business owners continue to fret over cash-flow problems. Here's a look at this week's economic developments and how they may impact your business.

Small-Business Optimism Steady

Despite a more positive outlook on the economy, concerns over cash flow kept small-business confidence down in February, Discover reported Tuesday.

Based on a survey of 1,000 owners nationwide, Discover's small-business confidence index dropped by less than a point to 113.4, from 114.3 in January. The monthly gauge's base value is 100.

Among owners polled, 40 percent cited cash flow as a growing concern last month, compared to just 24 percent in January, the report said.

Still, 17 percent said they planned to expand employment, while 39 percent spent more on business development, the report said.

"Economic confidence appears to be steady," Sastry Rachakonda, director of Discover's small-business card, said in a statement. "However, cash flow is something to keep an eye on when it comes to small-business indicators."

Smaller businesses are among the first to feel the impact of broader shifts in the economy, and as such are an important measure of the nation's economic well-being, Rachakonda said.

Consumer Confidence Up

A better outlook on jobs and business conditions boosted consumer confidence to its highest level more than five years, the Conference Board reported Tuesday.

Based on a survey of 5,000 households nationwide, the private research group's consumer confidence index rose from 110.2 in January to 112.5, its highest level since August 2001, the report said.

"Improving present-day business conditions and an easing in the proportion of consumers claiming jobs are hard to get have combined to lift consumers' spirits," Lynn Franco, the group's director of consumer research, said in a statement.

The group's present situation index also rose, from 133.9 to 139, as well as its expectations index, from 94.4 to 94.8, the report said.

Personal Income, Spending Up

Year-end bonuses helped boost personal income by 1 percent in January, the biggest gain in more than a year, while consumer spending rose by 0.5 percent, the Commerce Department reported Thursday.

The growth in personal income, which followed weaker gains in December, included a $64.2 billion increase in private wage and salary disbursements, the report said.

After-tax disposable income also rose, by 0.8 percent, compared to 0.5 percent in December, the report said. Disposable income was up 4.8 percent from the same period last year. With income growth outpacing spending, the personal savings rate rebounded to minus 1.2 percent in January from minus 1.4 percent the previous month, the report said.

Consumer spending accounts for roughly two-thirds of the economy.

Durable-Goods Orders Plunge

New orders for durable goods dropped 7.8 percent to $203.9 billion in January, the Commerce Department reported on Tuesday.

The declines followed two consecutive months of increases, the report said.

Led by aircraft and parts, transportation equipment saw the largest decrease in January, falling by 18 percent, or $12.3 billion, to $56.2 billion, the report said.

Excluding transportation, orders fell 3.1 percent, the report said.

Both shipment and inventories made modest gains.

Home Sales Mixed

While sales of existing homes rebounded to a seven-month high in January, sales of new homes plunged by an unexpected 16.6 percent, separate reports showed this week.

Warm weather in January pushed total existing-home sales up by 3 percent over December to an annual rate of 6.46 million, the National Association of Realtors reported on Tuesday.

Despite the gains, sales were down 4.3 percent from the same period last year, the report said.

The existing housing inventory rose 2.9 percent, leaving 3.55 million homes for sale on the market by the end of January with a median price for all housing types of $210,000 -- a 3.1 percent decline from January 2006, the report said.

By contrast, sales of new single-family homes dropped 16.6 percent in January to an annual rate of 937,000, the Commerce Department reported on Wednesday.

As many as 536,000 new homes were left on the market in January, enough for a 6.8 month supply at the current sales pace, the report said. The median sales price for new homes was $239,000, while the average selling price was $313,000, the report said.

David Lereah, the NAR's chief economist, said winter storms in February could have a negative impact across the housing market. "We shouldn't be surprised to see a near-term sales dip," Lereah said in a statement.

Meanwhile, construction spending dropped by 1.2 percent in January to an adjusted annual rate of $894.3 billion, the Commerce Department reported on Thursday.

Layoffs Hit Five-Month High

Led by 20,000 lost jobs in the aviation industry, total planned job cuts and layoffs in February surged by 33 percent to 84,014, the sharpest increase since September, Chicago-based employment consulting firm Challenger, Gray and Christmas reported Thursday.

The monthly gains included a single-day tally of 20,000 layoffs, the report said.

Other sectors hit by job losses last month included the food and computer industries, the report said.

"Clearly, the struggles in the American auto industry and housing market have not subsided," John Challenger, the firm's CEO, said in a statement.

Jobless Claims Rise

The number of new claims for unemployment benefits rose by 7,000 to 338,000 in the week ending Feb. 24, the Labor Department reported Thursday.

The largest increases in claims were in Rhode Island, Alabama, and Kansas, while claims were down in Ohio, Pennsylvania, Michigan, the report said.

Last updated: Mar 1, 2007




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