Poised for recovery, economy is lurching forward in fits and starts

Americans are feeling better about the economy, home prices are on the rise and companies are forecasting a brighter 2010.

While no one doubts the economy has a long way to go to come back from the recession, the reports Tuesday were signs of progress for a recovery that has proceeded in fits and starts.

"We're definitely moving in the right direction," said Scott Hoyt, senior director of consumer economics at Moody's Economy.com. "But on the other hand, we're moving there from a very low point. And we're still at a very low point."

Consumer confidence rose in January for the third straight month, the Conference Board said Tuesday. People said they felt better about the economy and were more willing to buy big-ticket items like cars and refrigerators.

The group's consumer confidence index now stands at its highest level since the financial meltdown in September 2008. But at 55.9, it's a far cry from readings of 90 or higher that indicate an economy on solid footing.

Consumer sentiment, a gauge of Americans' willingness to spend money on everything from Valentine's cards to vacations, is closely watched by experts because personal spending fuels 70 percent of the U.S. economy.

"Confidence remains incredibly depressed," Capital Economics analyst Paul Dales wrote in a research note. "This all suggests the legacy of the recession will live long in the mindset of consumers."

Encouraging news

Still, there are unmistakable signs of progress.

Home prices rose slightly in November, the sixth straight month of increases, according to Standard & Poor's and Case-Shiller. Fourteen of the 20 cities in their survey notched gains from October to November. Rising prices are important to the economic recovery because they make homeowners feel wealthier and lead them to spend more money.

Corporate America appears more optimistic these days, too. Delta Air Lines says demand for business travel is picking up. Johnson & Johnson says more people are buying its Aveeno and Neutrogena skin-care products.

Apple recorded its most profitable quarter ever, selling twice as many iPhones from October to December than it did before and one-third more Macintosh computers. And Corning said Tuesday its quarterly profit almost tripled on surging sales of glass for flat-screen televisions and computers.

Auto sales, which suffered a terrible year in 2009, are expected to climb in 2010. That means brighter outlooks for industries that supply chemicals for paint and steel for frames and ship cars and trucks around the U.S.

It's all encouraging news to people like Steve Rynish, who, for the first time in weeks, decided Tuesday to go out for lunch. The insurance claims adjustor reined in his spending in the downturn, brown-bagging it sometimes five days a week.

His health insurance premiums are rising and his 401(k) is still shrunken, but Rynish says he sees signs the picture is improving.

"It feels like things have reached a point and they're hanging there," said Rynish, 54, of Milwaukee, who stopped by a TJMaxx to pick up a rug for his house on his way to grab a bite. "I'd like to see more people back to work."

It's those fears -- about job security more than anything -- that may prevent a more vigorous recovery.

In December, unemployment lingered at 10 percent, just shy of the 26-year high reached in October. And many experts expect that figure to worsen before improving later this year.

"The most important thing to consumers is the availability of jobs," said Wells Fargo economist Mark Vitner. "And on that front there has been very little progress."

People who feel more secure about their jobs feel more comfortable spending money, fueling the nation's economic engine. To sustain a strong rebound, the economy will need people to spend more and companies to hire more.

Most economists predict the nation's economic growth strengthened in the October-December quarter, to an annual pace of 4.5 to 5 percent. The government's first estimate of the gross domestic product for the fourth quarter comes Friday.

Much of the growth probably came from government efforts to support the housing industry and broader economy, as well as rebuilding of inventories by manufacturers. As that activity fades, growth is expected to slow in the first half of this year.

Even though the economy continues to lose more jobs that it gains, Zane Laing of Portland, Ore., said she's still feeling rosier. She's seeing more customers buying clothes at the Gap store where she works.

"It's inspiring me personally," the 31-year-old said. "I feel like I'm OK in my job."

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AP Retail Writers Emily Fredrix in Milwaukee and Sarah Skidmore in Portland, Ore., contributed to this report. AP Business Writer Linda Johnson contributed to this report from Trenton, N.J.