Consumer and manufacturing data show improvement

NEW YORK (Reuters) - Consumer confidence rose in November to its highest in five months and Midwest business activity grew faster than expected, providing further evidence of economic recovery.

Still, a faster-than-expected fall in prices of U.S. single-family homes in September underscored the hurdles remaining for the recovery.

Tuesday's reports were the latest to suggest improvement in the economy, and the government's monthly employment report on Friday is forecast to show another month of job gains. In another encouraging sign, U.S. chain stores' sales and traffic over the weekend showed a strong start to the holiday shopping season.

The Conference Board, an industry group, said its index of consumer attitudes increased to 54.1 in November, the strongest since June, from a revised 49.9 in October. Analysts polled by Reuters forecast a reading of 52.6.

Separately, the Institute for Supply Management-Chicago's business barometer rose to 62.5 in November, up from 60.6 in October and above economists' forecast.

"On balance this morning's data has been positive and suggests continued stabilization in U.S. economic reports," said Omer Esiner, senior market analyst at Commonwealth Foreign Exchange in Washington.

STILL ANGST OVER EURO ZONE, HOUSING

In the U.S. markets, lingering worries about euro-zone sovereign debt overshadowed the data, however, pushing U.S. stocks lower, benchmark 10-year Treasury note prices higher and the dollar up against the euro.

Friday's jobs report is also expected to show unemployment remaining at 9.6 percent, a rate that has fueled worries about the consumer's ability to spend and has helped prompt action by the Federal Reserve. Earlier this month, the Fed announced plans to boost growth through increased asset purchases.

Fed policymakers, in minutes released last week, said they saw unemployment at significantly higher levels than they had in their last forecast in June.

Another top concern for policymakers has been the struggling housing market, and a report Tuesday gave further signs of weakness in that sector.

Standard & Poor's/Case-Shiller composite index showed home prices in 20 metropolitan areas declined 0.8 percent in September from August on a seasonally adjusted basis, more than the decline of 0.3 percent expected by economists in a Reuters poll.

Prices rose 0.6 percent from a year earlier, S&P said, but that was slower than the expected gain of 1.1 percent.

"The data confirms what I think a lot of economists suspected, which was that we would see house price weakness again after the expiration of the first-time home-buyer tax credit," said Christopher Low, chief economist at FIN Financial in New York.

The economy is coming back from its worst downturn since the 1930s, but growth has been slow, with gross domestic product expanding at an annualized rate of 2.5 percent in the third quarter.

Retailers, meanwhile, have been mostly optimistic about holiday spending and profit forecasts. On Tuesday, home improvement chain Lowe's Cos reiterated its sales and profit outlook for its current fiscal year 2010, and its stock rose 1.7 percent to $22.75.

(Additional reporting by Corbett Daly in Washington and Nick Olivari and Emily Flitter in New York; Editing by Jan Paschal and Padraic Cassidy)