Consumer confidence unexpectedly dropped to its lowest level in two-and-a-half years in October as consumers fretted about job and income prospects.
In other data on Tuesday, U.S. home prices were unchanged in August, pointing to a market that continued to stabilize but has yet to gain traction.
The Conference Board, an industry group, said its index of consumer attitudes fell to 39.8 from a upwardly revised 46.4 the month before. It was the lowest level since March 2009.
Economists had expected the index to rise to 46.0, according to a Reuters poll. September was originally reported as 45.4.
The present situation index slipped to 26.3 from 33.3, while the expectations index declined to 48.7 from 55.1. The expectations gauge was also at its lowest since March 2009.
Consumer expectations, which had improved in September, gave back all of the gain and then some, as concerns about business conditions, the labor market and income prospects increased, Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement.
Consumers' view of the labor market was mixed. The number of respondents that said they found jobs plentiful fell to 3.4 percent from 5.6 percent. However, the jobs hard to get category eased to 47.1 percent from 49.4 percent.
The assessment of price increases was unchanged with expectations for inflation in the coming 12 months at 5.8 percent.
Recent better than expected manufacturing and jobs data has tempered fears the economy could lapse back into recession, with most expecting a slow pace of growth that should avoid contraction.
Analysts are hoping to get confirmation of that from U.S. gross domestic product data for the third quarter later in the week. The advance reading is expected to show the economy grew at an annual rate of 2.5 percent after a weak first half of the year, according to a Reuters poll of economists.
But the surprising drop in consumer confidence in August may suggest that the improvement in third quarter economic growth may not be sustained.
HOUSING MARKET STABILIZES
The S&P/Case Shiller composite index of house prices in 20 metropolitan areas was flat compared with the month before on a seasonally adjusted basis. A Reuters poll of economists had forecast a gain of 0.1 percent
On an unadjusted basis, price gains slowed with the index up 0.2 percent compared with a 0.9 percent gain in July.
Overall, another weak read from the housing sector -- consistent with ratcheted lower expectations as the selling season winds down, Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut, wrote in a note
On an adjusted basis, 14 of the 20 cities saw monthly declines, with Atlanta and Las Vegas among the biggest losers.
The annual rate of decline improved, with prices in the 20 cities down 3.8 percent compared with a year over year decline of 4.1 percent the month before. Still, it fell shy of expectations for a decline of 3.5 percent in August.
The good news is continued improvement in the annual rates of change in home prices, David Blitzer, chairman of the index committee at Standard & Poor's, said in a statement.
In spring and summer's seasonally strong period for housing demand, we cautioned that monthly increases in prices had to be paired with improvement in annual rates before anyone could declare that the market might be stabilizing.
The anemic housing market continues to be one of the biggest hurdles for the economic recovery as attempts to bolster the sector have had limited success.
In the latest efforts, the Obama administration said on Monday it will expand a mortgage refinancing program in a step that could help up to one million borrowers.
(Reporting by Leah Schnurr)