U.S. consumer confidence halted a six-month slide in July, bouncing off its lowest level in more than a decade as worries over inflation receded slightly, the Conference Board said.
Sentiment remains fragile, however, and will not be helped by news that U.S. home prices plunged at a record pace in May from a year earlier, according to the closely watched Standard & Poor's/Case Shiller indexes.
The Conference Board said its overall monthly measure of consumers' mood rose to 51.9 this month—the first rise since December—from an upwardly revised 51.0 in June.
Last month's reading was the lowest in 16 years.
Analysts said the improvement this month came on the back of oil's retreat from record highs and cautioned that this could prove temporary.
"We know the consumers are very attuned to gas and oil prices and they have been coming down," said Robert Brusca, chief economist at Fact and Opinion Economics in New York. "It's hard to put a shiny gloss on this confidence report." he added.
On Wall Street, stocks extended their gains on the confidence report and the dollar also firmed versus the euro and yen. U.S. government bonds, which generally benefit from signs of economic weakness, extended their losses.
Economists polled by Reuters had expected a reading of 50.0 for July. The 72 forecasts ranged from 48.0 to 53.0. June's reading was originally reported at 50.4.
The Conference Board, an industry group, said its gauge of inflation expectations edged lower to 7.6 percent after hitting a record high of 7.7 percent in May and June.
Federal Reserve policy-makers have expressed concerns about keeping inflation expectations in check.
Despite July's slight rise, the consumer confidence index has still dropped by more than half since the same month last year, when it was at 111.90.
Since then, housing market troubles have triggered a severe credit crisis.
The S&P/Case Shiller showed prices of U.S. single-family homes plunged at a record pace in May from a year earlier, with each of the 20 regions monitored showing annual declines for a second month.
The index of 20 metropolitan areas fell 0.9 percent in May from April, bringing the measure down 15.8 percent from May 2007.
Optimists may take heart from the fact that the decline was slightly less than expected and not as severe on a monthly basis as in April.
Also, seven regions showed increases on a month-over-month basis, providing a "possible bright spot" for U.S. housing that otherwise continues to weaken, S&P said.