WASHINGTON — U.S. consumers peering over the "fiscal cliff" don't like what they see.
Fears of sharp tax increases and government spending cuts set to take effect next week sent consumer confidence tumbling in December to its lowest level since August.
The Conference Board said Thursday that its consumer confidence index fell for the second straight month to 65.1, down from 71.5 in November.
The survey showed consumers' outlook for the next six months deteriorated to its lowest level since 2011 — a signal to Lynn Franco, the board's director of economic indicators, that consumers are worried about the tax hikes and spending cuts that take effect Tuesday if the White House and Congress can't reach a budget deal.
The December drop in confidence "is obvious confirmation that a sudden and serious deterioration in hopes for the future took place in December — presumably reflecting concern about imminent 'fiscal cliff' tax increases," said Pierre Ellis, an economist with Decision Economics.
The decline in confidence comes at a critical time when the economy is showing signs of improvement elsewhere, as evidenced by two other reports released Thursday:
• Americans bought new homes last month at the fastest pace in more than 21/2 years, further evidence of a sustained housing recovery. Sales of new homes rose 4.4 percent in November from October to a seasonally adjusted annual rate of 377,000, the Commerce Department said Thursday. That's the fastest pace since April 2010, when a federal tax credit boosted sales.
New home sales have also increased 15.3 percent over the past year. The improvement comes from depressed levels. Sales remain below the 700,000 that economists consider healthy.
A big reason for the rebound is the excess supply of homes that were built during the housing boom has finally thinned out. Only 149,000 new homes were for sale at the end of last month, according to the report. That's just above a record low of 143,000 in August.
• The average number of people seeking U.S. unemployment benefits over the past month fell to the lowest level since March 2008, a sign that the job market is healing. The Labor Department said Thursday that weekly applications dropped 12,000 to a seasonally adjusted 350,000 in the week ended Dec. 22. The four-week average, a less volatile measure, fell to a nearly five-year low of 356,750.
Still, the Christmas holiday may have distorted the figures. A department spokesman said many state unemployment offices were closed Monday and Tuesday and could not provide exact data. That forced the government to rely on estimates. Normally, the government might estimate application data for one or two states. Last week, it had to use estimates for 19.
But the political wrangling in Washington threatens the economy's slow, steady progress. President Barack Obama and the House returned to Washington on Thursday to resume talks with just days to go before the deadline.
A short fall over the cliff won't push the economy into recession. But most economists expect some tax increases to take effect next year. That could slow economic growth.