US consumers confidence rebounds

Americans shook off some of their concerns about the economy as consumer sentiment rebounded this month from a 2-1/2-year low but a fall in house prices in September underscored the weak foundations of the recovery. The sentiment data released on Tuesday was a positive sign heading into the holiday shopping season. Separate figures showed US retailers reported strong sales last week.
The Conference Board said its index of consumer attitudes jumped to 56.0 from 40.9 in October, for the highest level since July and handily topping economists' forecasts for 44.0. "This is a huge rise in consumer confidence. It gets us back to second-quarter levels and further underscores the dramatic move that we've seen in consumer spending," said Lindsey Piegza, economist at FTN Financial in New York.
Still, the confidence index remains historically low and is off from a peak of 72.0 seen in February. There also was less worry about job and income prospects, with a measure of how hard jobs are to get falling to its lowest since January 2009 at 42.1 percent. Expectations of income increases in the next six months rose to 14.9 percent from 11.1 percent.
Consumer confidence had taken a hit since the summer amid political gridlock, worries of another US recession and a growing eurozone debt crisis. The cut-off date for the survey was November 15, before the failure of a congressional committee charged with reaching a deal on $1.2 trillion in deficit reductions. While fears of recession of have ebbed, analysts warn the economy remains sensitive to shocks, particularly uncertainty surrounding the euro zone debt crisis.
"It's a conflicted environment," said Paul Ballew, chief economist at Nation-wide Insurance in Columbus, Ohio. Retailers reported a strong start to the holiday season. The International Council of Shopping Centers said sales rose 1.7 percent last week, the biggest gain since June, while the Johnson Redbook Index of large merchandise retailers showed sales rose 5.4 percent last week from a year earlier.
With consumer spending accounting for about 70 percent of the US economy, the recovery will be hard pressed to make significant gains without consumers' help. Home equity is a major source of wealth for Americans and a sustained recovery in housing would help put more money back in consumers' pockets. Compared to a year earlier, prices in the 20 cities were down 3.6 percent in September after a year over year decline of 3.8 percent the month before.
In contrast, the US Federal Housing Finance Agency index showed home prices rose 0.9 percent in the same month and were down just 2.2 percent from a year ago. The index is calculated using purchase prices of houses financed with mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac.
Separate data provided a silver lining as the number of homeowners who are 'underwater' on their mortgages - owing more than their home is worth - decreased modestly in the third quarter, though levels remained high. Data analysis company CoreLogic reported the number of properties with so-called negative equity was 10.7 million, or 22.1 percent of all residential properties with a mortgage. That is a slight decrease from 10.9 million, or 22.5 percent, in the second quarter.