Consumer confidence shows gains

A widely watched indicator of consumer confidence unexpectedly rose for the second straight month in January, hinting that the U.S. economy would continue to grow in the first half of 2005, but at a slower pace.

The Conference Board, a New York-based research group, reported Tuesday that its index of consumer confidence rose by 0.7 point to 103.4 in January, up from a revised 102.7 in December.

Economists had been expecting the index to fall to 101.3, in part because of their own concerns about job growth, the ballooning trade deficit and the war in Iraq. “I had been expecting those issues to flow into the January (consumer confidence) number,” BMO Nesbitt Burns senior economist David Watt said.

Instead, Watt and other economists were pleasantly surprised by consumers’ upbeat view of the economy, particularly the labor market.

Separately on Tuesday, the National Association of Realtors reported that sales of previously owned homes dipped 3.3 percent in December to a seasonally adjusted annual rate of 6.69 million units, off slightly from November’s strong pace of 6.92 million units.

For all of 2004, sales rose 9.4 percent to an all-time high of 6.68 million units as home buyers continued to enjoy some of the lowest mortgage rates in decades.

Sales of existing homes last year were well above the 6.10 million sold in 2003, the association said.

But analysts expect sales of both existing and new homes to decline slightly in 2005, while mortgage rates rise as the Federal Reserve continues its credit-tightening campaign.