Consumer Confidence, Home Prices Rise (zt)

U.S. Economy: Consumer Confidence, Home Prices Rise (Update1)

March 30 (Bloomberg) -- Consumers in the U.S. gainedconfidence in March as the gloom over job prospects began tolift, indicating employment will be central to preserving therecent acceleration in spending.

The Conference Board’s confidence index rose to 52.5,exceeding the median forecast of economists surveyed byBloomberg News, from 46.4 in February, according to figurestoday from the New York research group. Home prices unexpectedlyrose in January for an eighth month, data also showed.

“With signs of improvement in the labor market, confidenceis more likely to be up than down in the next few months,” saidJames O’Sullivan, chief economist at MF Global Ltd. in New York,who forecast sentiment would pick up. “It’s still a low levelof confidence.”

Rising stock prices, a stabilizing housing market and fewerfirings may be giving households hope that the recovery from theworst recession since the 1930s will be sustained. The 184,000increase in payrolls economists project for this month shows itwill take years for the economy to reverse the loss of 8.4million jobs since the contraction began in December 2007.

Stocks rose on the improving economic outlook. The DowJones Industrial Average increased 11.6 points, or 0.1 percent,to close at 10,907.42. Standard & Poor’s 500 Index rose lessthan 0.1 percent to 1,173.27.

Economists forecast confidence would rise to 51 for themonth from a previously reported 46, according to the median of73 projections in a Bloomberg News survey. Estimates ranged from46.6 to 59.

Confidence Averages

The measure averaged 45 in 2009, and 97 during theexpansion that ended in December 2007.

Home prices in 20 U.S. cities rose 0.3 percent in January,indicating the housing market is stabilizing as the economyexpands. The S&P/Case-Shiller home-price index climbed from theprior month on a seasonally adjusted basis after a similar gainin December.

Cheaper homes, low borrowing costs and governmentincentives have combined to support the housing market after itscollapse helped trigger the recession.

“It’s a temporary stabilization,” said Joseph Brusuelas,president of Brusuelas Analytics in Stamford, Connecticut, whohad forecast a month-over-month gain in the adjusted index.“Foreclosures are still going to bite the market. Given thepreponderance of negative housing data, we may see another legdown.”

Data at Odds

The S&P/Case-Shiller figures are at odds with othermeasures that have shown property values are again softening. Agauge of national single-family home values issued by FirstAmerican CoreLogic’s LoanPerformance unit, the figures trackedby the Federal Reserve, showed prices dropped 1.9 percent inJanuary, the fourth decrease in five months.

The Conference Board’s measure of present conditionsincreased to 26, the highest level since May, from 21.7 inFebruary. The gauge of expectations for the next six months roseto 70.2 from 62.9.

The share of consumers who said jobs are plentiful advancedto 4.4 percent from 4 percent. The proportion of people who saidjobs are hard to get decreased to 45.8, the fewest since August.

More people also anticipated incomes and employment wouldimprove in the next six months, the report showed.

“Despite this month’s increase, consumers continue toexpress concern about current business and labor marketconditions,” Lynn Franco, director of the Conference Board’sconsumer research center, said in a statement. “Overall,consumer confidence levels have not changed significantly sincelast spring.”

Spending Improves

Consumer spending in February rose for a fifth consecutivemonth, figures from the Commerce Department yesterday showed.Best Buy Co. and Nike Inc., which have reported higher-than-anticipated profits, are among companies that may keepbenefitting as the emerging recovery gives Americans theconfidence to buy.

Nike, the world’s largest maker of athletic shoes, saidthis month that third-quarter profit more than doubled as NorthAmerica posted a sales increase for the first time in a year.

Best Buy, the largest U.S. electronics retailer, last weekreported sales climbed after the Richfield, Minnesota-basedcompany cut prices on flat-panel TVs and offered discountsduring the holidays.

Fed Signals

Fed officials this month signaled the U.S. recovery isn’tstrong enough to stoke inflation, reduce unemployment quickly orjustify an end to record-low interest rates.

While the economy has “continued to strengthen,” policymakers said in a statement after their March 16 meeting that“employers remain reluctant to add to payrolls.”

The projected increase in payrolls this month, based on themedian forecasts of economists surveyed, would be the biggest inthree years.

Even so, the unemployment rate is projected to end the yearat 9.5 percent, showing the labor market will continue to be achallenge to consumers this year, according to a survey ofeconomists taken by Bloomberg earlier this month.

To contact the reporter on this story:Courtney Schlisserman in Washington [e-mail]

Last Updated: March 30, 2010 16:35 EDT