NEW YORK,US - US consumer confidence recovered more than expected in August as fears over inflation eased, while financial markets combed through housing data on Tuesday for reasons to hope the worst may be over.

Sales of newly built US single-family homes in July were lower than economists expected but rose from a June pace that was the slowest in nearly 17 years, while the glut of homes on the market also eased, a government report showed on Tuesday.

Another report said US home prices in metropolitan areas were down 15.9 per cent from a year earlier, a record drop.

Separately, the S&P credit rating agency said it now expects home prices as measured by the Case-Shiller index to fall 29 per cent from peak-to-trough, up sharply from its previous forecast of a 20 per cent drop in April.

The Conference Board said its index measuring consumers' mood jumped to 56.9 this month from July's 51.9 for the highest reading since May, while a decline in inflation expectations should please Federal Reserve officials worried about an unwelcome rise in price pressures this year.

The data by no means suggested the stagnant US economy was vaulting to recovery, though some analysts said it showed embryonic signs of stabilisation that could herald a slow turn for the better if maintained.

'Confidence is still quite depressed, but it's a glimmer of hope from the lows we saw in June,' said Ms Dana Saporta, economist at Dresdner Kleinwort Securities in New York.

'I attribute the increase to the drop in gasoline prices, which offset a deteriorating labour market.' US stocks initially rose after the release of the consumer confidence data but lost momentum and were little changed from opening levels by the close.

The US dollar gained against other currencies while US government bonds, which benefit from weak economic conditions, added to earlier losses.

The improvement in consumer sentiment came during a month when oil prices retreated further from July's record highs but consumers' evaluation of their present situation still fell to its lowest in five years in the survey.

Much of this may reflect job-market insecurity. The index of 'jobs hard to get' rose to 32.0 from a revised 30.2 in July, pushing the gauge to its highest since October 2003.

'Consumer confidence readings suggest the economy remains stuck in neutral, but may be showing signs of improvement by early next year,' Ms Lynn Franco, director of the Conference Board Consumer Research Center, said in the report.

The Conference Board, an industry group, said its gauge of inflation expectations fell to 6.7 per cent, its lowest since 6.1 per cent in March, from July's revised 7.5 per cent.

It hit a record high of 7.7 per cent in May and June and was originally reported at 7.6 per cent for July.

Homes front, Political front
The S&P/Case-Shiller composite index of home prices in 20 metropolitan areas slipped 0.5 per cent in June from May, bringing it down 15.9 per cent from June 2007. The index's month-over-month drop was the smallest since July 2007.

The new home sales report showed the inventory of homes available for sale shrank 5.2 per cent to 416,000, the lowest since October 2004. The July sales pace put the supply of homes available for sale at 10.1 months' worth.

Commenting on the data, the White House said it will take time for the economy to work through the housing downturn.

'The data today paint a mixed picture but it's clear it will still take some time to work through the downturn in housing,' White House spokesman Tony Fratto said in Texas, where US President George W. Bush was at his ranch.

The campaigns of presidential candidates John McCain and Barack Obama used the data as an opportunity to trade barbs over economic strategy.

Mr Jason Furman, Obama Campaign economic policy director, said in a statement that Mr McCain had 'sat on the sidelines, opposing and delaying urgent reforms to our housing markets.'

He said there was a need for 'more vigorous measures' to address the sector's weaknesses and limit the damage to the economy.

McCain spokesman Taylor Griffin said in a statement: 'As our housing market continues to struggle, Barack Obama's plans for tax increases and government spending will cost jobs at a time when we need them most.'