US consumers are ending the year on a better note than they began it, but a lot of anxiety remains.
Two surveys released Tuesday make the point.
First, the Conference Board's index of consumer confidence rose to 52.9 in December, well above its level a year ago, as hopes for an economic recovery gain ground. But confidence remains far below normal (the 1985 base level for the index 100), and Americans are reporting that their "present situation" remains at a 26-year low.
Second, home prices across the US were unchanged in October, according to the Standard & Poor's Case-Shiller index. That kind of stability is a big improvement from the sharp declines under way a year ago. But with foreclosures likely to be running high in 2010, economists say it's too soon to say that the housing market – an important barometer of financial health for many households – has bottomed out.
"The underlying data raise several disturbing questions about just how much ... improvement there has actually been" in consumer confidence, Mark Vitner, an economist at Wells Fargo Securities, said in a written analysis of Tuesday's numbers . "Fewer consumers expect their income to increase over the next six months," he noted, "and plans to purchase automobiles and homes both declined during the month."
In the Conference Board survey, only 10 percent of Americans said they expect an increase in income in coming months. The outlook for the job market improved slightly, with the number expecting more employment opportunities edging up to 16.2 percent. The number of Americans expecting fewer jobs fell to 20.7 percent.
A separate survey on the job market also provided grounds for hope. A CareerBuilder survey of 2,700 employers found that 20 percent plan to increase their full-time payrolls in the new year, while 9 percent plan to reduce staff levels. The survey's suggests the uptick in jobs will be greatest in the West, with other regions also showing solid improvement. But Matt Ferguson, CEO of CareerBuilder, warned that employers are still cautious about hiring.
Together, the surveys lend credence to the view that the economy has made major progress out of a crisis. Some big headwinds remain. About 1 in 4 mortgage holders is "under water," with a loan balance larger than the home's market value, according to estimates by First American CoreLogic.
That, combined with still-high unemployment, could boost foreclosures and renew downward pressure on home prices.
But many economists predict that a shift from job losses to job creation will keep the economy – and consumer confidence – on a slow upward path in 2010.
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