A more upbeat outlook on jobs pushed Americans' confidence in the economy higher in December for the second month in a row, a survey released Tuesday said.
Consumers' expectations for the job market over the next six months reached their highest level in two years, but Americans remain gloomy about their current prospects.
Meanwhile, a closely watched home price index released Tuesday showed that home prices rose for the fifth month in a row in October, but the recovery continues to be uneven with only 11 of the 20 metro areas tracked showing gains.
The Conference Board said its Consumer Confidence Index rose to 52.9, up from a revised 50.6 in November, but the reading is still far short of the 90 that would signify a solid economy. In October, consumer confidence was 48.7.
Economists surveyed by Thomson Reuters predicted a reading of 52 for December.
The index, which hit a historic low of 25.3 in February, had enjoyed a three-month climb from March through May, fueled by signs that the economy might be stabilizing. The road has been bumpier since June as rising unemployment has taken a toll on consumers.
Economists watch consumer sentiment because spending on goods and services for consumers accounts for about 70 percent of U.S. economic activity by federal measures.
One key component of the Confidence index that measures consumers' outlook over the next six months rose to 75.6 from 70.3 last month, the highest level since December 2007, when the index was 75.8. But the survey's other main component, which measures shoppers' current assessment, actually fell to 18.8 from 21.2.
The survey of 5,000 households ran Dec. 1 through 21.
"Regarding income, however, consumers remain rather pessimistic about their short-term prospects and this will likely continue to play a key role in spending decisions in early 2010," Lynn Franco, director of The Conference Board Consumer Research Center said in a statement.
Still, many retailers are breathing sighs of relief after the holiday selling season turned out better than expected, according to MasterCard Advisors' SpendingPulse, which track all forms of payment, including cash.
However, even though shoppers saw their confidence improve slightly and bought a bit more, they've been cautious in their spending. During the Christmas season, they focused on practical items for loved ones and even for themselves, while shying away from buying gift cards and opting for deeply discounted items instead.
Stubbornly high unemployment
Experts say such patterns might remain for several years amid unemployment that could be stubbornly high.
The unemployment rate dipped in November to 10 percent, down from a 26-year high of 10.2 percent in October. Some analysts worry it will again start to rise in coming months and won't peak until hitting 10.5 percent next summer.
Still, businesses cut their payrolls by a net of just 11,000 jobs in November, the smallest decrease since the recession started two years ago, according to the November job report.
For December, economists surveyed by Thomson Reuters expect that the unemployment rate will tick up to 10.1 percent, but they also expect no job losses on net when the government reports figures Jan. 8.
According to The Standard & Poor's/Case-Shiller index, home prices edged up 0.4 percent to a seasonally adjusted reading of 145.36 in October from September. The index was off 7.3 percent from October last year, nearly matching expectations of economists surveyed by Thomson Reuters.
The index is now up 3.4 percent from its bottom in May, but still almost 30 percent below its peak in April 2006.
The Conference Board survey showed that consumers' assessment of current conditions worsened in December. Those saying conditions are "bad" increased to 46.6 percent from 44.5 percent, while those saying business conditions are "good" decreased to 7.0 percent from 8.1 percent.
Consumers' six-month outlook improved in December. Those anticipating business conditions will be better over the next six months increased to 21.3 percent from 19.7 percent, while those expecting conditions will deteriorate declined to 11.9 percent from 14.6 percent.
The outlook for the job market was also more positive. The percentage of consumers expecting more jobs to become available in the months ahead increased to 16.2 percent from 15.8 percent, while those expecting fewer jobs declined to 20.7 percent from 23.1 percent. However, the proportion of consumers anticipating an increase in their incomes declined to 10.3 percent from 10.9 percent.