By Bob Willis Nov. 25 (Bloomberg) -- U.S. consumer confidence unexpectedly rose in November from a record low as falling gasoline prices helped alleviate concerns about rising unemployment and tumbling financial markets. The Conference Board’s index of consumer confidence climbed to 44.9, the second-lowest reading since 1974, from 38.8 the prior month. A separate report showed home prices continued to drop in September, further undermining consumer spending. Consumers are retrenching amid increasing job losses, falling stock and home prices and the worst credit crunch in seven decades. Still, falling gasoline prices and the end of the political uncertainty that preceded the presidential election this month may have comforted consumers, economists said. “The consumer is hunkered down,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight in Lexington, Massachusetts. “We are still expecting a contraction in consumer spending in the fourth quarter.” Consumer confidence was projected to remain unchanged from an originally reported 38 in October, according to the median estimate in a Bloomberg News survey of 67 economists. The revised October figure was still the lowest level since monthly record- keeping began in 1967. Forecasts ranged from 30 to 45. Earlier today, a report showed the S&P/Case-Shiller home- price index of 20 U.S. metropolitan areas dropped 17.4 percent in September from a year earlier, the most since year-over-year records began in 2001. Record Foreclosures The economy contracted at a 0.5 percent annual pace from July through September, more than initially estimated, the Commerce Department also reported today. Consumer spending dropped at the fastest pace since 1980. Stocks maintained earlier gains after the Federal Reserve took new steps to unfreeze credit for homeowners, consumers and small businesses. The central banks committed as much as $800 billion to the new initiatives. The housing slump, which triggered the credit crisis and global slowdown, will probably extend into a fourth year. Foreclosures are running at a record rate, increasing the number of properties for sale and pushing down home prices. That impedes consumer spending as homeowners have a harder time borrowing against their homes. Outlook Improves The improvement in confidence this month reflected expectations that the economic situation wouldn’t get much worse than it already was. The gauge of the outlook for the next six months increased to 46.7 from 35.7. The Conference Board’s measure of present conditions dropped to 42.2, the lowest since June 1993, from 43.5. “Despite the improvement in the expectations index this month, consumers remain extremely pessimistic and the possibility that economic growth will improve in the first half of 2009 remains highly unlikely,” Lynn Franco, director of the Conference Board’s consumer survey, said in a statement. The share of consumers who said jobs are plentiful fell to 8.8 percent from 9 percent last month, today’s report showed. The proportion of people who said jobs are hard to get increased to 37.2 percent from 36.6 percent. The proportion of people who expect their incomes to rise over the next six months climbed to 13.3 percent from 11.1 percent. The share expecting more jobs increased to 9.2 percent from 7.3 percent. Gasoline Prices Lower gasoline prices are one key bright spot for consumers. Average prices for regular unleaded gasoline at the pump fell to $1.89 a gallon yesterday from an average $3.10 in October. Consumers may also find comfort from the end of the political uncertainty prior to the presidential election this month, said Mike Schenk, a senior economist at the Credit Union National Association. “Change is something many welcome, no matter who they supported,” he said. Still, the backdrop for the economy is grim. The jobless rate, at 6.5 percent in October, is the highest since 1994, and could rise as high as 9 percent by the end of 2009, according to estimates from Goldman Sachs Group Inc. The possibility of a collapse at General Motors Corp., Ford Motor Co. or Chrysler Holding LLC poses a prospect of more layoffs. The economy lost jobs for 10 consecutive months through October, bringing the total drop in payrolls to 1.2 million this year, Labor Department figures showed this month. Some economists anticipate job losses accelerated in November. Plummeting Stocks Plummeting stocks also battered household finances. The Standard & Poor’s 500 index closed Nov. 20 at its lowest level in 11 years. Retailers ranging from Best Buy Co. to Nordstrom Inc. are cutting revenue forecasts ahead of what may be the worst holiday shopping season in six years. The International Council of Shopping Centers has forecast the November-December holiday season will be the worst since 2002. “In 42 years of retailing, we’ve never seen such difficult times for the consumer,” Brian Dunn, Best Buy’s president and chief operating officer, said in a statement last week. “People are making dramatic changes in how much they spend, and we’re not immune from those forces.” To contact the reporters on this story: Bob Willis in Washington at bwillis@bloomberg.net

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