WASHINGTON (Reuters) — US existing home sales rose in November for a second straight month and consumer confidence hit an eight-month high in December, according to reports yesterday showing the economy ending the year on a solid note.Other reports showed business activity expanded in the US Midwest this month, suggesting the ailing factory sector could be finding its footing, while initial claims for state jobless benefits edged up slightly last week.

Prices for US government bonds fell and the dollar trimmed losses as traders saw the stronger-than-expected data as lowering chances the Federal Reserve would cut interest rates early next year. The data gave only a brief boost to stock prices which closed slightly down on the day.

The National Association of Realtors said the pace of existing home sales rose 0.6 percent in November to a 6.28 million-unit annual rate, defying Wall Street forecasts for sales to ease slightly and providing the latest suggestion that housing activity was stabilising after a steep drop.

Separately, the Conference Board said its index of consumer sentiment climbed to 109.0 in December — the highest since April — from an upwardly revised 105.3 in November as consumers’ views on the labor market improved.

In addition, the National Association of Purchasing Management-Chicago said its gauge of US Midwest business activity rose to 52.4 from 49.9 in November, moving back above the 50 line in a sign activity was expanding.

“Across the board the data was strong — it was a royal flush,” said Michael Woolfolk, currency strategist at Bank of New York.

Woolfolk said the increase in the Midwest business barometer was particularly welcome, calling it “definitely good news for the underlying fundamentals of the US economy”. A drop in the index below 50 in November had presaged a similar move by the Institute for Supply Management’s national gauge of factory activity.

While the employment component of the Chicago index fell to 45.8 in December from 49.4 in November, showing a second straight month of contraction, prices paid held steady and new orders rose.

“The survey suggests expansion of manufacturing, but it is just a regional survey; we have to wait until Tuesday for the Institute for Supply Management (national) report,” said Michelle Meyer, an economist at Lehman Brothers in New York.

The upbeat reading on home re-sales followed a report on Wednesday that showed a stronger-than-expected pace of new home sales last month as well.

“It lends credence to the opinion that we’re a good portion of the way through the housing slump,” Bruce Zaro, chief technical strategy at Delta Global Advisors in Boston, said of the existing home sales report.

The number of existing homes on the market slipped one percent to 3.82 million units, the Realtors’ trade group said. The November’s sales pace marked a 7.3 months’ supply, down from 7.4 months in October.

Although sales volume rose for a second straight month, median home prices were off 3.1 percent from year-ago levels, the fourth consecutive drop.

NAR Chief Economist David Lereah said the data held “mixed news” but it broadly signalled a stronger housing sector with inventories and sales stabilising.

“The housing contraction has bottomed,” he said.

Earlier yesterday, the US Labour Department said the number of workers applying for first-time jobless benefits rose 1,000 to 317,000 last week, suggesting stable labour-market conditions. Wall Street economists had expected claims to rise to 320,000.