NEW YORK (Reuters) - Consumer confidence rose to a three-year high in February, but a drop in home prices for the sixth month in a row in December suggested the economy still faces significant hurdles.
The Conference Board, an industry group, said its index of consumer attitudes rose to 70.4 in February from a revised 64.8 in January as consumers felt more optimistic about the economy and their income prospects. It was the highest level since February 2008 and better than the reading of 65 that analysts had expected.
The expectations index rose to 95.1, its highest level since December 2006, from 87.3, while the present situation index advanced to 33.4 from 31.1. Consumers' assessment of the labor market improved modestly, but the overall view of employment conditions was mixed.
U.S. stocks cut losses slightly after the data, but financial markets were otherwise unmoved by the morning's data as investors were focused on a revolt in Libya.
"It's a positive number and that could offset some of the negative tone we've seen from outside the U.S. borders," said Sean Incremona, economist at 4Cast Ltd in New York.
Oil prices rose to a 2-1/2 year high on the political turmoil, highlighting a potential headwind for consumers if commodity prices continue to rise. Indeed, the Conference Board report showed consumers' expectations for inflation in the coming 12 months were at their highest since June 2009, rising to 5.6 percent from 5.5 percent the month before.
"If these oil prices stay elevated with the ongoing difficulties in the Middle East, this number will start to sink back down again," said Joseph Battipaglia, market strategist at Stifel Nicolaus, in Yardley, Pennsylvania, of the consumer confidence figure.
Separately, data showed single-family home prices fell in December, bringing them closer to the low seen in 2009.
The S&P/Case Shiller composite index of 20 metropolitan areas declined 0.4 percent in December from November on a seasonally adjusted basis, as expected.
For the year, prices fell 2.4 percent, slightly more than the 2.3 percent decline analysts had forecast.
While the composite held above its 2009 low, 11 cities hit their lowest levels since home prices peaked in 2006 and 2007, the report showed.
Unadjusted for seasonal impact, home prices fell 1 percent for the month, leaving them just 2.3 percent above their April 2009 troughs, S&P said.
(Reporting by Leah Schnurr, Editing by Chizu Nomiyama)
