Other data on Thursday underscored the firming tone in the economy, with consumer sentiment scaling a six-month high in December and a barometer of future activity rising for a seventh straight month in November.

While the economy is wrapping up 2011 with a spring in its step, bickering over budget policy in Washington and the debt crisis in Europe have cast a cloud over its prospects next year.

A payroll tax cut and benefits for the long-term unemployed, both of which are due to expire at year end, have become tangled in partisan politics and it is unclear whether they will be renewed.

There were signs on Thursday the impasse had been broken, with House of Representatives Speaker John Boehner informing Senate Majority Leader Harry Reid he will set a vote on a Senate-passed two-month extension of the payroll tax cut, according to a Democratic leadership aide.

" The economy is carrying some clear momentum into 2012," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. " If Congress doesn't kill that by failing to extend the tax breaks, we can look forward to a better year ahead."