Dec. 28 (Bloomberg) -- The U.S. economy is bouncing back from two quarters of slowing growth, reports today suggested.

The Conference Board's index of consumer confidence rose to 109 this month, defying forecasts for a drop, while the National Association of Realtors said sales of previously owned homes unexpectedly increased 0.6 percent in November. The National Association of Purchasing Management-Chicago reported that its gauge of business activity rebounded from the first contraction in more than three years.

Bonds weakened as traders speculated that the Federal Reserve is less likely to lower interest rates early next year. Expectations for rate cuts multiplied after downturns in housing and manufacturing resulted last quarter in the slowest growth this year.

``These data are giving us a bit of a springboard to go into 2007 on a better note,'' said John Ryding, chief U.S. economist at Bear Stearns Cos. in New York. The numbers are ``going to leave the Fed on hold for a while.''

Some economists are unswayed and point to details in today's figures that signal persistent softness. The supply of existing homes for sale was near the highest in more than 13 years, the Chicago employment index fell to the lowest since July 2004 and the Labor Department said the number of people continuing to collect unemployment benefits rose.

Role of Consumers

At the same time, the trio of reports does indicate that the pace of economic expansion is unlikely to slacken further next year. Consumers -- whose confidence was expected to decline -- kept the economy afloat last quarter as declines in housing and auto production shaved growth to 2 percent. That's down from 2.6 percent in the prior three months and 5.6 percent in January to March.

Home purchases showed the first back-to-back monthly gains since March 2005. Sales were still down 10.7 percent from a year earlier.

``It appears we've hit bottom,'' David Lereah, chief economist of the Realtors' group, said at a briefing in Washington. ``The price drops are necessary to stir sales. It is working.''

The median price of an existing home fell 3.1 percent in November from a year ago to $218,000, the fourth consecutive monthly decline.

Inventories

The number of previously-owned homes for sale decreased 1 percent to 3.82 million last month. That represented a 7.3 months' supply at the current sales pace, down from 7.4 months in October.

``We have to get inventories back in the six month range,'' Lereah said in an interview. ``For three quarters of the country we could see a good, solid expansion if we can get those inventories in the sixes.''

Consumer spending accounts for about 70 percent of gross domestic product and the improvement in optimism bodes well for an extension of the five-year expansion in the world's largest economy. The number of respondents who said jobs were plentiful was the highest since July, the New York-based Conference Board said.

``This really just points to the fact that the economy is experiencing a soft landing and no recession,'' said Lynn Franco, director of the Conference Board's Consumer Research Center, in an interview. ``It speaks volumes about the resiliency of the consumer.''

Beating Forecasts

Economists had expected the consumer confidence index to fall to 102, from a previously reported 102.9 for November, according to the median of 51 forecasts in a Bloomberg News survey. Estimates ranged from 99 to 105.

The rise in confidence wasn't accompanied by a broad-based increase in buying plans. Fewer people said they planned to purchase a home or a major appliance in the next six months. More said they planned to buy a new vehicle.

The Chicago group surveys companies with U.S. and worldwide operations. Any group member, even those not located in the Midwest, can respond. For that reason, some economists watch the Chicago index for an early reading on the outlook for U.S. manufacturing, which accounts for 12 percent of the economy.

The report precedes the Institute for Supply Management's nationwide manufacturing survey, which is due out on Jan. 2. The slide in the Chicago index last month was followed by a contraction to 49.5 in the ISM factory survey. The December ISM index is forecast to rise to 50, according to a Bloomberg survey.

`Very Upbeat'

``The consumer is certainly very upbeat, and even manufacturing has swung back firmly into the plus column,'' said Chris Rupkey, senior financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. ``The long economic party from the 2001 recession can continue as we ring in the new year.''

Even so, initial reports suggest U.S. holiday retail sales grew at a slower rate than last year. MasterCard Advisors said on Dec. 26 that sales from Nov. 24 to Dec. 24 rose 3 percent, compared with a 5.2 percent gain last year. The MasterCard data is based on sales using cash, checks and MasterCards.

The International Council of Shopping Centers yesterday reduced its estimate for sales growth at U.S. retailers in November and December to the ``low end'' of 2.5 percent to 3 percent. Last year, sales rose 3.6 percent.

Stores opened early and slashed prices on Dec. 26 to lure shoppers for post-Christmas purchases. Kohl's Corp., the fourth- largest U.S. department store chain, offered 10 percent off sweaters already marked down 60 percent. RadioShack Corp., the third-largest U.S. electronics retailer, sold Akai flat-panel televisions for $799.99, a $200 discount.

The Conference Board surveys 5,000 households, usually by the middle of each month, for its confidence report. The University of Michigan, which released its final December report on Dec. 22, covers a smaller sample of households. The University of Michigan's sentiment index fell to 91.7 for December.

To contact the reporter on this story: Courtney Schlisserman in Washington at cschlisserma@bloomberg.net; Shobhana Chandra in Washington at schandra1@bloomberg.net

Last Updated: December 28, 2006 15:51 EST