Consumer confidence gains but housing tenuous

NEW YORK (Reuters) - U.S. consumer confidence in January hit its highest level in nearly a year and a half, but a closely watched housing index showed an unexpected decline in November home prices, giving a mixed picture of the economic recovery.

The Conference Board, an industry group, reported on Tuesday that consumer confidence rose for the third straight month in January, driven by improved economic conditions.

Its index of consumer attitudes rose to 55.9 in January, the highest reading since September 2008 and up from an upwardly revised 53.6 in December. The index topped the median forecast for a reading of 53.5 from analysts polled by Reuters.

"This really bodes well for consumer spending. It shows we are in a modest recovery and we will likely maintain a modest recovery for the next few quarters," said Ward McCarthy, chief financial economist with Jefferies & Co in New York.

The confidence data helped drive U.S. stock indices higher in midday trade, while safe-haven Treasury debt prices pared gains and the dollar was steady.

A decline in job losses in recent months and a resurgent stock market have helped improve consumers'' mood as the U.S. economy returned to growth last year after the worst economic slump in decades.

Yet concerns remain about the sustainability of the recovery after the most severe housing market downturn and highest unemployment in more than a quarter century.

With this likely in mind, the Federal Reserve''s policy-setting Federal Open Market Committee was meeting on Tuesday and Wednesday to weigh the economic outlook.

Most market analysts do not expect any interest rate move at the conclusion of the meeting, nor any change to the language indicating that the federal funds target rate will remain near zero for an extended period.

Despite some signs of improvement, the outlook for global growth remains cloudy.

The International Monetary Fund on Tuesday sharply raised its forecast for global growth to 3.9 percent from an October estimate of 3.1 percent.

However, China''s clampdown on bank lending has raised some concerns in financial markets about global economic growth prospects.