US home prices have posted their first quarterly increase in three years after rising for a second month in a row in June.
The better-than-expected housing figures, along with an uptick in consumer confidence further raised hopes on Tuesday that the US economy is emerging from its worst recession since the 1930s.
Still, investors appeared buoyed by the economic developments on Tuesday, with major US equities indexes closing higher after briefly hitting new highs for the year.
Housing recovery
"The recession appears to be over, with consumer attitudes lagging behind broad economic developments," said Steven Wood, chief economist at Insight Economics in California.
The Standard & Poor's/Case-Shiller, a closely watched housing price index, showed prices of US single family homes rose by 1.4 per cent in June from May, after creeping up by 0.5 per cent in April, suggesting the crippling housing slump was easing.
While the Case-Shiller 10- and 20-city indexes have plunged by 54.3 per cent and 45.3 per cent, respectively, from their 2006 peaks, June's improvement was broad based, with 18 of 20 metropolitan areas logging gains for the month.
"The most important take-away is the breadth of the rise," said Adam York, an economist at Wells Fargo Securities in Charlotte, North Carolina. "The absolute worst is behind us."
Separately, the Federal Housing Finance Authority said US home prices rose by 0.5 per cent in June, according to its seasonally-adjusted monthly index, while prices fell by 0.7 per cent in the second quarter.
Anna Piretti, an economist at BNP Paribas in New York, said the data suggested "house price deflation has bottomed".
The housing market, which collapsed under the weight of the sub-prime mortgage crisis that triggered the financial meltdown, is seen as a critical component to an economic recovery.
Consumer confidence
Adding to the good news, the New York-based Conference Board, an industry group, said consumer confidence climbed to a reading of 54.1 in August from 47.4 in July, reversing two months of decline and easily beating forecasts on an improved outlook for the job market and the overall economy.
Economists closely monitor confidence because consumer spending accounts for about 70 per cent of US economic activity.
Consumer sentiment has recovered somewhat since hitting a record-low of 25.3 in February.
And Americans' pessimism about the economy appears to be lifting, with consumers' expectations for the economy over the next six months rising to 73.5 from 63.4 in July, the highest level since December 2007, when the recession began.
More consumers said they were likely to buy a home or a car within the next six months than said so in July's survey.
But economists warned that consumer confidence remains far below levels associated with a healthy economy and might not lead to the increased spending critical for a broad recovery.
"Confidence remains well below its historical average of 95 and it has not even regained the level of 61 seen before the collapse of Lehman almost a year ago," said Paul Dales, a US economist at Capital Economics in Toronto.
A reading of 90 indicates the economy is on solid footing; anything above 100 signals strong growth.
The weak jobs market remains a sticking point to recovery and even the Fed has conceded the likelihood of a "jobless recovery," with the unemployment rate staying high long after growth resumes.
That, and the ballooning deficit projections diluted the positive news on Tuesday.
Source: Agencies
source: http://english.aljazeera.net/news/americas/2009/08/2009825205153843197.html
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