Contracts for US home resales hit a 2 1/2 year high in November. The factory activity in the Midwest expanded as well. These are indications that the economy remained strong despite the threat of tighter fiscal policy.
The National Association of Realtors said that its Pending Home Sales Index gained 1.7 percent to 106.4. This was its highest reading since April 2010 when the home buyer tax credit expired. The Pending Home Sales Index is based on contracts signed last month. November is the third month in a row of gains for signed contracts. They become sales after a month or two. An increase of 5 percent was recorded in October.
The Institute for Supply Management-Chicago business barometer increased to 51.6 in December from 50.4 in November. A reading above 50 indicates expansion in the regional economy. It was the second month of growth and due to the rebound in the number of new orders.
The data showed growth momentum from the third quarter to continue into the final quarter of 2012 despite the fact that households and businesses were bracing for higher taxes and sharp government spending cuts in 2013.
Data in the fourth quarter showed consumer spending, employment, housing, and other manufacturing signs to be positive. There is no evidence of a slowdown of the economy as the year end but economists warned that things could change on January 1.
People are worried about the stalled budget talks in Washington that will avert the $600 billion fiscal cliff. They fear that going over the cliff could bring the nation into recession. There are no indications that the economy has enough momentum to withstand the shock of going over the fiscal cliff. But the good news is that the GDP would be in the mid-twos for the last quarter of 2012.