US consumer sentiment more upbeat than expected

The US consumer, whose spending spree was the engine of global growth in the past decade, expressed more confidence in the future than any forecaster predicted, raising hopes that freefalling house prices and shaky business spending may not after all be a drag on the world's largest economy this year.

The Conference Board consumer confidence survey for February, out yesterday, suggested Americans have shaken off the blues thanks to the improving labour market and better income prospects.

The improvement in sentiment eclipsed gloomier data from the housing market, which showed house prices still going down in most areas of the country, and a disappointing read-out of durable goods orders in January.

Estimates for the latest consumer confidence index ranged from 58 to almost 68, but the figure was 70.8, up from a revised 61.5 in January and the highest number since before the Japan tsunami and Greek crisis derailed recovery expectations a year ago.

Amna Asaf, economist at Capital Economics, said the improving sentiment was likely to be reflected in consumption growth and in first quarter GDP, but cautioned that there was still a long way to go to heal.

"Even after the latest rally, the headline consumer confidence index is still well below its long-run average of around 92 and with petrol prices still rising it is possible that confidence could drop back in the coming months," she said.

Consumer spending accounts for 70 per cent of the US economy and has been lacklustre since the recession, which sent unemployment spiking. Recent weekly benefit claims have fallen, however, and the official unemployment rate is down to 8.3 per cent.

The housing market remains a significant problem for the economy.

The Case-Shiller index showed prices in the 20 biggest metropolitan areas in December were down an average 4 per cent on the same month in 2010. The year-on-year rate of decline had accelerated from 3.9 per cent.

Federal Reserve Governor Elizabeth Duke urged Congress to do more to help the housing market, including allowing more refinancing of mortgages guaranteed by the Government.

- Independent