Many signs point to stronger economy

Posted: January 29, 2013

WASHINGTON - The U.S. economy is a study in contrasts.

The housing, banking and auto industries are surging back to health, and that has helped push the stock market to a five-year peak. Higher prices for homes and stocks tend to make people feel wealthier and spend more.

Yet, unemployment remains high and hiring modest. The end of a Social Security tax cut is shrinking already flat pay. Federal budget fights have put businesses and consumers on edge.

Balanced between those tailwinds and headwinds, the economy is struggling to accelerate. By the end of this year, though, many analysts think the tailwinds will succeed in boosting growth and fueling a more robust economy in 2014.

Uncertainty about government spending cuts could be defused by summer, and any spending cuts that do take effect will likely be phased in over several years. Also, for the first time since the recession ended 31/2 years ago, several key areas of the economy are driving growth, which means the strength is broader:

Housing. The nation has finally worked off the excesses of the housing bubble. Once, there were too many homes for sale; now, there are too few to meet demand. That is pushing up home prices, construction and hiring - trends that could accelerate U.S. economic growth in 2013 by a full percentage point, economists say.

Autos. Struggling consumers put off car purchases for years. Now, pent-up demand is being released: Sales reached a five-year high of 14.5 million last year. Analysts expect sales to reach 15.5 million this year, though still below the 17 million of 2005.

Banking. The financial crisis hammered banks and choked off loans. But lending has been rebounding. Mortgage and auto loans are rising. Commercial and industrial loans are up as well.

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