NEW YORK, (Reuters) - American consumers are more confident than at any time in the last three years thanks to better prospects for the economy and jobs, even as separate data showed house prices were still falling.
The Conference Board, an industry group, said its index of consumer attitudes rose to 70.4 in February from a revised 64.8 in January.
Consumer confidence remains low in historical terms, but economists said they saw underlying strength in the numbers.
The improvement in the outlook for the labor marketv recently bodes well for consumer spending growth, said Anthony Chan, chief economist at J.P. Morgan Private Wealth Management.
“It offers some encouraging words on the sustainability of consumer spending,” he said.
The cutoff date for the consumer confidence survey was Feb.
10, before violent unrest in Libya caused a surge in oil prices, a key component of consumer spending.
Consumer confidence was at its highest level since February 2008 and better than a forecast by 65 economists.
The expectations index, which measures what consumers expect to see in six months time, rose to its highest level since December 2006 at 95.1 from 87.3. The present situation index advanced to 33.4 from 31.1.
Consumers' assessment of the labor market improved modestly, though the overall view of employment conditions was mixed.
U.S. stocks briefly cut losses after the data, but resumed sliding as financial markets were focused mostly on a revolt in oil producer Libya. Oil prices rose to a 2-1/2-year high, highlighting a potential headwind for consumers if commodity prices continue to rise. For an analysis, see The Conference Board report showed consumers' expectations for inflation in the coming 12 months were at their highest since June 2009, rising to 5.6 percent from 5.5 percent the month before.
Economists also noted a change in the survey's data provider that prompted revisions back to November 2010.
“SUBSTANTIAL RISK” OF FURTHER HOME PRICE FALLS
Separately, the Standard & Poor's/Case Shiller composite index of home prices in 20 metropolitan areas declined 0.4 percent in December from November on a seasonally adjusted basis, according to data released on Tuesday.
Prices for single-family homes fell for the sixth month in a row, bringing them closer to a trough in 2009 that marked the low point after the U.S. housing bubble burst in 2007.
Economist Robert Shiller, who helped devise the index, warned that house prices could fall another 25 percent. For details, see “My intuition rates the probability of another 15, 20, even
25 percent real home price decline as substantial. That's not a forecast, but it's a substantial risk,” Shiller told reporters on a conference call.
High unemployment and the anemic housing market remain the biggest challenges to sustainable economic recovery. Even so, economists also noted the rate of decline in home prices has eased in the last two months, and in an upbeat sign, Home Depot Inc lifted its outlook as homeowners took up long-delayed maintenance and repair projects. Unadjusted for seasonal impact, home prices fell 1.0 percent for the month, leaving them just 2.3 percent above their April 2009 troughs, S&P said.
While the composite held above its 2009 low, 11 cities hit their lowest levels since home prices peaked in 2006 and 2007, the report showed.
Analysts said the weakness in home prices since the expiration of government stimulus last summer was waning, though the large amount of foreclosures entering the market will continue to pressure prices.