US consumer confidence hit an eight month high in December on improving job prospects, lending the economy further support, even though weak home prices could delay a recovery in the housing market. The sharp rise in sentiment reported by the Conference Board on Tuesday offered hope for a pick-up in consumer spending after an anaemic performance in November.
"It suggests there is some real improvement in the economy. Consumer confidence really boils down to how people feel about the labour market," said Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.
The Conference Board's index of consumer confidence rose to 64.5 this month from 55.2 in November, beating economists' expectations for a reading of 58.3.
Other reports showed the uneven nature of the recovery. House prices in the year ended October have fallen by 3.4 percent in October in 20 major metropolitan areas, S&P/Case Shiller reported. The Dallas Federal Reserve also said manufacturing in its region weakened in December.
But consumers are increasingly upbeat. The Conference Board said its present situation index jumped to a three year high, with the expectations index the highest in seven months. The economy's improving tenor was also highlighted by a separate report showing factory activity in the central Atlantic region firmed this month after being flat in November, implying underlying strength in the manufacturing sector.
The Richmond Federal Reserve said new orders and shipments from factories in the region increased, offsetting a modest decline in the employment measure.
Last month's rise in consumer confidence largely reflects a better tone in the labour market. The unemployment rate dropped to a 2-1/2 year low in November and applications for first-time jobless benefits are the lowest since April 2008.
Despite the show of resilience, the debt crisis in Europe continues to cast a shadow over the US economy. "This good news is likely to be tested in the new year by slowing global growth and ongoing risk from Europe," said Eric Green, chief economist at TD Securities in New York.
"Still, the stronger momentum going into year end is for real and at face value puts the economy in better position to withstand what is sure to be stronger headwinds to growth in the first half of 2012."
Other data showed a steeper drop in single-family home prices than expected in October, underscoring the challenges still confronting the housing market. The S&P/Case Shiller composite index of 20 metropolitan areas dropped 1.2 percent on an unadjusted basis, worse than economists' expectations for a 0.5 percent fall. Prices dropped 0.6 percent in September.
For the year, home prices were down 3.4 percent in October.
The share of consumers viewing jobs as "plentiful" rose to 6.7 percent this month from 5.6 percent in November. The proportion of those viewing jobs as "hard to get" slipped to 41.8 percent from 43 percent in November.
The share of consumers anticipating more jobs in the months ahead rose to 13.3 percent from 12.4 percent, while those expecting fewer jobs declined to 20.2 percent from 23.8 percent.
More consumers are expecting their incomes to increase, with that proportion rising to 17.1 percent from 14.1 percent in November.