Booming economy sends Times looking for the dark lining

Gasoline is cheaper than it was before Hurricane Katrina slammed into New Orleans. Consumer confidence jumped last month and new- home sales hit a record. The stock market has been rising. Even the nation's beleaguered factories seem headed for a happy holiday season.

By most measures, the economy appears to be doing fine. No, scratch that, it appears to be booming.

But as always with the United States economy, it is not quite that simple.

For every encouraging sign, there is an explanation. Consumer confidence is bouncing back from what were arguably some of its worst readings in years. Gasoline prices - the national average is now $2.15, according to the Energy Information Administration - have fallen because higher prices held down demand and Gulf Coast supplies have been slowly restored.

The latest reading on home sales, released yesterday, contradicts most recent measures of housing activity, which generally indicate a slowdown. And, yes, manufacturers' fortunes are on the mend, but few besides airplane makers are celebrating.

It all means the economy is likely to end the year with a splash. But before you splurge on a new car, consider this: Many economists do not expect the party to continue, especially if the Federal Reserve continues taking the punchbowl away and raises interest rates. That could further slow the housing market, damp consumer spending and crimp corporate profits.

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Actually raising rates is probably spurring the housing market as people try to beat the next rate rise which will make them qualify for a lesser house. Rates will have to rise substantially to stop that momentum.
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