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Consumer Confidence Hits Two-Year High; Factory Orders Up 2.4%

U.S. consumer sentiment rose in January to its highest level in two years on favorable expectations for the U.S. economy and for higher wage gains, a survey showed. Still, the number came in below expectations.

Separately, a government report showed new orders at U.S. factories rose 2.4% in December, higher than forecast, as inventories edged up.

The Reuters/University of Michigan Surveys of Consumers said the final January reading on the consumer sentiment index rose to 96.9 from 91.7 at the end of December. The final January reading was the highest since December 2004.

The median forecast on the overall sentiment reading among analysts polled by Reuters was 98.0, which was on target with a preliminary January estimate from Reuters/University of
Michigan made last month.

The survey's gauge of current consumer conditions was 111.3 in January against a December reading of 108.1, while its final measure on consumer expectations was 87.6 versus 81.2.

Consumers, while generally upbeat, remained worried about inflation despite a decline in gasoline prices.

The survey's one-year inflation index edged up to 3.0% in January from 2.9 in late December, and its five-year inflation index stood at 3.0% for a third straight month.

The Reuters/University of Michigan Surveys of Consumers, a monthly series of data on U.S. consumer sentiment, are produced by the University of Michigan in Ann Arbor, Michigan. From
January 2007, Reuters has exclusive rights to distribute the data.

November Orders Revised Higher

Analysts polled by Reuters had expected factory orders to gain 1.8% after November's revised 1.2% rise, originally reported as a 0.9% gain.

U.S. manufacturing is being watched closely by the Federal Reserve, in its deliberations on interest rate policy, as it monitors the health of the economy to judge whether a cooling
housing market has a broader-than-expected impact on growth.

On Wednesday the Fed held interest rates unchanged from June at 5.25% and acknowledged recent signs of "somewhat firmer" economic growth and "tentative signs" the housing market was stabilizing.

Factory orders have increased in three of the last four months. New orders in 2006 were 5.3%above the previous year, the Commerce Department said.

Excluding transportation, factory orders rose 2.2%, the Commerce Department said. Non-defense capital goods orders excluding aircraft, seen as a good gauge of business spending, increased 3.1% from a 1.0% fall the previous month.

Manufacturing shipments gained 1.4%, accelerating from November's 0.2% increase, while inventories were up 0.1%.

The inventory-to-shipments ratio, a measure of how many months it would take to exhaust stores of goods, eased to 1.22 months' time from a downwardly revised 1.23 in November.
Economists say this measure can signal sales may have been stronger than expected.

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