ST : Confidence up in US but home prices down

25 JAN 2011,
Confidence up in US but home prices down

WASHINGTON: Confidence among United States consumers has risen more than forecast this month to the highest level in eight months as Americans became more optimistic about job prospects.

The Conference Board's index of sentiment increased to 60.6 from a revised 53.3 the prior month that was higher than previously estimated, figures from the New York-based private research group showed yesterday.

Economists projected the January gauge would rise to 54, according to the median forecast in a Bloomberg News survey.

A pickup in optimism, an improving labour market and tax relief may combine to encourage consumers, whose spending accounts for about 70 per cent of the economy.

'Confidence is going in the right direction,' Mr Brian Jones, an economist at Societe Generale in New York, said before the report. 'In general, the labour market is improving, and you need to have continued improvement there to keep consumer confidence rising.'

The Conference Board's measure of present conditions rose to the highest since November 2008 - to 31 from a revised 24.9.

The gauge of expectations for the next six months rose to 80.3 from 72.3.

The gain contrasts with the Thomson Reuters/University of Michigan preliminary consumer sentiment index, which fell this month as Americans feared higher petrol prices would hurt their finances.

Another report yesterday showed housing prices in November fell the most in a year, indicating housing has yet to join the economic rebound.

US single-family home prices fell for a fifth straight month in November and could plumb new lows soon, a closely watched survey showed.

The Standard & Poor's/Case-Shiller composite index of 20 metropolitan areas declined 0.5 per cent in November from October on a seasonally adjusted basis, though it was not as sharp as the 0.8 per cent fall expected by economists.

Prices have fallen 1.6 per cent in the past year, sharper than the 1.4 per cent predicted by Reuters-polled economists.

Sixteen of the 20 cities showed annual price declines in November, while 19 of 20 cities showed monthly price drops.

The housing market has been struggling since homebuyer tax credits expired earlier this year. To take advantage of the tax credits, buyers had to sign purchase contracts by April 30.

'A double-dip could be confirmed before Spring,' said Mr David Blitzer, chairman of the index committee at S&P.

He defined a double-dip as both the 10- and 20-city composite indices setting new post-peak lows. The 10-city index is 4.8 per cent above its April 2009 low, while the 20-city index is just 3.3 per cent higher than its low that same month.

BLOOMBERG, REUTERS