WRAPUP 3-US consumer confidence rises despite market upheaval

* U.S. consumer confidence highest since March 2008

* Job market worries dissipating

* But house prices fall in first quarter

(Adds comments, more context)

By John Parry

NEW YORK, May 25 (BestGrowthStock) – U.S. consumer confidence rose
in May to its highest level in more than two years as an
improving jobs outlook defied for now the growing fears about
European debt market turmoil and threats to global growth.

By contrast, the U.S. housing market, another pillar of the
economy, is looking shaky after the expiration at the end of
April of a home buyer’s tax credit.

Jobs were key to consumers recovering their nerve. A
Conference Board report on Tuesday said fewer of those surveyed
found jobs “hard to get.” Consumers account for more than
two-thirds of U.S. economic growth.

After more than 8 million jobs were shed in a long-running
economic downturn, U.S. payrolls grew for four straight months
including April.

“It appears that consumers are focusing on the improvement
in the labor market as an indication that things are getting
better,” said Tom Simons, money market economist with Jefferies
& Co in New York.

U.S. consumer confidence rose for the third-straight month
in May, to 63.3, from a downwardly revised 57.7 in April. See

The median of forecasts from analysts polled by Reuters was
for a reading of 59.0 in May.

The optimism of the U.S. consumer contrasts with recent
signs of consumer demand in Europe, which have been mixed.

Financial markets mostly ignored the data and worried about
Europe’s public debt crisis. Prices of U.S Treasury bonds rose.
Major stock indexes lost about 2 percent but rallied late in
the session to end little changed for the day.

The May consumer confidence survey results showed Americans
were little affected by the euro zone debt crisis or the
resulting sharp sell-off in U.S. stocks (Read more about the stock market today. ) earlier this month.

“Apparently they’re not paying too much attention to what’s
going on in Europe,” Simons said.

“Given what’s going on, the fact that confidence is
continuing to improve shows that the U.S. consumer is very
provincial and not sort of globally minded as to how they think
the developments in Europe will affect corporations in the
United States and their ability to hire workers,” he said.

The Dow Jones industrial average (.DJI: ) on May 6 briefly
fell nearly 1,000 points — its biggest-ever intraday point
drop. The Conference Board survey’s cut-off date for the latest
survey was May 18, and it is unclear how consumers responded to
the latest leg down in markets.
Graphic on consumer confidence http://link.reuters.com/nyj36k
Graphic on March home prices http://link.reuters.com/mej36k
For a Breakingviews column see [ID:nN25126639].


Housing, a cornerstone of the U.S. economy that crumbled in
the credit crisis and contributed to the most protracted
recession in decades, is still rickety, data showed.

“Most forecasters think it is a floor, and they think we’ll
be bouncing around it this year maybe, but then it’s going to
start going up, but not everyone agrees on that,” Robert
Shiller, an economist and co-founder of the S&P/Case-Shiller
Home Price Index, told Reuters Insider on Tuesday.

Single-family home prices in 20 major cities were unchanged
in March from February, but fell in the first quarter on
renewed price pressure as sellers and buyers braced for a tax
credit to expire on April 30, Standard & Poor’s/Case Shiller
home price indexes showed on Tuesday. See [ID:nNLLPGE64B]

Prices have rebounded from lows hit during the crisis, yet
the end of tax incentives for home buyers, combined with
mounting foreclosures, suggest more weakness, S&P said.

For the first three months of the year, S&P’s national home
price index fell 3.2 percent, unadjusted, compared with a 1
percent drop in the fourth quarter.

But Californian cities, among the hardest hit by the credit
crunch, posted gains.

Yet the performance of the domestic economy is not the only
concern for the United States, given the danger that economic
weakness or a surge in government debt yields could become a
global phenomenon, analysts worry.

A worst-case scenario for the United States would be
cascading sovereign debt defaults that spread into larger
European economies.

Banks could clamp down on lending to protect their capital
base. Goldman Sachs has estimated a “severe” credit crunch
would take about 1.5 percentage points off of U.S. economic
growth, potentially triggering a double-dip recession.

U.S. bank exposure to the entire euro area is estimated at
$1 trillion.

After the worst recession in 70 years, the health of the
economy is a key issue for American voters in the November
congressional elections that are expected to be rough on many
incumbent politicians.

Stock Report

(Reporting by Lynn Adler, Emily Flitter, Emily Kaiser,
Caroline Valetkevitch and Wanfeng Zhou; Writing by John Parry;
Editing by Kenneth Barry)

WRAPUP 3-US consumer confidence rises despite market upheaval