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U.S. home prices drop, consumers turn gloomy

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U.S. home prices fell more steeply than expected in November, and consumer confidence soured in January, highlighting the hurdles still facing the economic recovery.

The S&P/Case-Shiller composite index of single-family home prices in 20 metropolitan areas declined 0.7 percent on a seasonally adjusted basis, a survey showed on Tuesday, a bigger drop than the 0.5 percent economists expected.

The decrease added on to the 0.7 percent decline seen in October from September.

Separately, a report from The Conference Board said an index of consumer attitudes fell to 61.1 in January from a revised 64.8 the month before, as Americans turned gloomy about the job market and their income prospects.

The data frustrated expectations for an increase after sharp gains in November and December.

"We are braced for a more bumpy picture over the next few months. A lot of expectations probably ran away or got a little too lofty coming into the end of the year," said Sean Incremona, economist at 4Cast Ltd in New York.

"We are still in a very modest recovery, and we do see consumption slowing this quarter, and data like this supports that picture."

The economy accelerated at its fastest pace in 1-1/2 years in the final months of 2011, but early 2012 could see weaker growth. A beleaguered housing market and lackluster consumer spending remain among the biggest challenges for the fragile recovery.

Separate data showed business activity in the U.S. Midwest grew more slowly than expected in January, hurt by a weaker labor market.

On a seasonally adjusted basis, 17 out of 20 cities racked up monthly home price declines, and average national prices were around levels seen in mid-2003, according to S&P/Case-Shiller.

Prices in the 20 cities also steepened their year-over-year decline, falling 3.7 percent compared to a 3.4 percent decline in October.

Recent data has lead to optimism the housing sector is in the early stages of the healing process, with some economists looking for prices to find a bottom this year. Still, the recovery is expected to be a lengthy one as the market remains hampered by an excess amount of homes for sale in the midst of weak demand.

The Institute for Supply Management-Chicago business barometer slid to 60.2 from 62.2 last month, shy of expectations for 63. A reading above 50 indicates expansion in the regional economy.

Highlighting the difficulty facing lawmakers who are aiming to rein in the deficit, congressional forecasters said the United States is on track for a fourth straight year with a $1 trillion-plus budget deficit as a sluggish economy holds down corporate tax revenue.

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