Small-business owners make investments for the year ahead; housing market continues to cool.

Small-business owners make investments for the year
ahead; housing market continues to cool.

Jan. 27, 2006--With the pace of growth slowing,
business owners took time to invest in new equipment
in December, preparing for an expectedly busy start to
the new year. Here’s a look at this week’s economic
developments and how they may impact your business.

Growth Spurt Ahead

A forward-looking report from the Commerce Board on
Monday was upbeat about near-term economic growth --
closely reflecting the guarded optimism of small
businesses in recent months.

The private national research group’s monthly Index of
Leading Indicators, based on a gauge of 10 key
economic indicators, rose 0.1% in December to 138.5,
following a 0.9% increase in November.

Six of 10 leading index components made gains in
December, led by consumer expectations, real money
supply, stock process, average weekly initial jobless
claims, and new orders for consumer goods, the board
reported. Vendor performance, building permits, and
average weekly manufacturing hours were among the
components seeing declines, the report showed.

The board’s Coincidence Index, which measures current
economic activity, also made gains in December --
rising 0.2% to 121.1, after a 0.4% gain in November.
Industrial production, employees on nonfarm payrolls,
and manufacturing and trade sales were stronger, while
personal income held steady, the index showed.

December marked the third consecutive month of gains
in the leading index, boosting its six-month average
growth rate to 2.1%, compared to just 0.6% in May. The
index shot up rapidly from mid-2003 to mid-2004, when
it began fluctuating within a range of more moderate
gains up until the end of last year.

The latest figures likely signaled a spurt of growth
this spring, followed by slower gains later in the
year, Conference Board researchers said.

Orders Up

An early indication of near-term growth came Thursday,
with the Commerce Department reporting a $2.8 billion
upswing in factory orders for durable goods in
December, led by sudden demand for business equipment.

Overall, durable-goods orders jumped 1.3% in December
to $228.1 billion, after a 5.4% increase in November,
the department reported. Half of the gains, a full
$1.9 billion, came from business and corporate
spending on new machinery and equipment, the report
showed -- the sharpest monthly increase in over a
decade.

Shipments of manufactured durable goods -- such as
machinery, computers, and appliances -- were also on
the rise in December, by 3.5% to $221.1 billion, the
report showed.

Housing Market Still Cooling

Continuing a recent downward trend in the housing
sector, existing-home sales plunged by 5.7% to an
annual pace of 6.6 million, compared to 7 million in
November, the National Association of Realtors
reported Wednesday.

The national median price for existing homes was
$211,000 in December, a 10.5% increase from the
previous year, the report showed.

With home sales already in decline, prices are
expected to follow suit, according to association
president Thomas Stevens. “We’re coming off of five
years of tight supply, and many sellers are accustomed
to expecting very strong price gains and exceptional
returns on their investment,” Stevens said in a
statement. “With the supply of homes improving and
buyers having more choices, the rate of price growth
should come down to more normal levels this year.”

Jobless Claims Rise

First-time claims for unemployment insurance rose to
283,000 in the week ending Jan. 21, an increase of
11,000 from the previous week, the Department of Labor
reported Thursday. The highest rate of first-time
jobless claims was in Alaska, followed by Michigan,
Puerto Rico, and Mississippi, the department said.