WRAPUP 4-US consumer morale ebbs, home prices near 2009 lows

* Consumer confidence index falls to 63.4 in March

* One-year inflation expectations highest since Oct 2008

* Single family house prices drop for 7th month in Jan
(Adds Fed’s Fisher, background)

By Lucia Mutikani

WASHINGTON, March 29 (Reuters) – U.S. consumers turned
gloomy in March as rising energy prices ignited fears of
inflation, a change in mood that could dent global economic

Another report on Tuesday showed home prices fell for a
seventh straight month in January but held above their
post-housing bust low of April 2009.

The reports added to signs the U.S. economy lost momentum
in early 2011, although the impact of high energy prices —
aggravated by unrest in Middle Eastern countries — is likely
to be temporary, economists said.

They point to an improving labor market as underpinning

“We are likely looking at a continuing pattern of ‘two
steps forward, one step back’ in terms of the collective mood,
given the sources of uncertainty and risk that will not be
easily resolved,” said Jim Baird, a partner at Plante Moran
Financial Advisors Kalamazoo, Michigan.

The Conference Board, an industry group, said its index of
consumer attitudes fell to 63.4 in March after hitting a
three-year high of 72.0 in February. The March reading was
below economists’ expectations for a drop to 65.0.

Rising gasoline prices, boosted by unrest in the Middle
East and North Africa, are eroding consumer confidence and
raising inflation expectations. A separate survey last week
showed morale among households at its lowest in more than a

The Conference Board found one-year price expectations rose
to their highest since October 2008.

Economists said the jump in inflation expectations was
unlikely to trouble the Federal Reserve, which has said price
pressure from commodities should be temporary. Core inflation,
which strips out food and energy costs, is not far from recent
record lows.

In Germany, worries about the global economy and inflation
drove down consumer sentiment for the first time in 10 months.

U.S. financial markets were little moved by the data.


The weaker U.S. confidence survey came on the heels of
numbers on Monday that showed consumer spending, adjusted for
inflation, rose only modestly in February, pointing to a
slowdown in first-quarter economic growth.

“It suggests to me that consumer spending is already
tracking at about half the rate of growth in the first quarter
as it did in the fourth quarter,” said Christopher Low, chief
economist at FTN Financial in New York.

The apparent hiccup in growth comes as policymakers at the
Fed ramp up a debate on whether the economy is strong enough
for the central bank to scale back its massive stimulus

The head of the St. Louis Fed, James Bullard, said the U.S.
central bank could trim its bond-buying by $100 billion before
its scheduled expiry in June. His tone contrasted with other top
Fed officials who said on Monday the economy still needed the
program’s full $600 billion of support.

Bullard, a non-voting member of the policy committee , is
not seen as representative of the consensus at the Fed, which
backs seeing the easing program through. However, another Fed
official, Dallas Fed President Richard Fisher, echoed Bullard’s
skepticism about the easing, saying he would use his vote on the
panel this year to object to any efforts to expand it.

Jittery markets, nervous about a pick-up in inflation and
the likelihood other major central banks will tighten policy in
response to troubling signs of price pressures, are on high
alert for any evidence the Fed could reverse course and took
their cues from the more hawkish Fed commentary.

The dollar rose against the yen and against a basket of
other major currencies after Fisher’s remarks during a late Fox
Business television interview.

The S&P/Case-Shiller composite index of home prices in 20
cities slipped 0.2 percent in January from December. The
decline was less severe than expectations of a 0.4 percent
drop, but economists say an oversupply of homes from
foreclosures will keep house values depressed for a while.

Compared with a year ago, prices fell 3.1 percent.

Sinking house prices are not seen derailing the economy as
residential construction accounts for only about 2.3 percent of
gross domestic product. [ID:nN29248426]

Economists also see limited impact on the U.S. economy from
the devastating March 11 earthquake and tsunami in Japan. Some
firms have been forced to scale back production at U.S. plants
due to shortages of key parts or components imported from Japan.

“There was already a big shift in sentiment before the
earthquake,” said Harm Bandholz, chief U.S. economist at
UniCredit Research in New York.

“The U.S. economy is mostly services. About 6.5 percent of
cars sold in the U.S. are made in Japan and just 5 percent of
car parts used in the U.S. are imported from Japan.”

The cutoff date for the consumer confidence survey was
March 16.
(Additional reporting by Wanfeng Zhou, Corbett Daly and Mark
Felsenthal; Editing by Leslie Adler and Dan Grebler)

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WRAPUP 4-US consumer morale ebbs, home prices near 2009 lows