NEW YORK American consumers are gloomier about the economy that at any point since just before the U.S. invasion of Iraq, as slumping housing prices and soaring fuel costs depress consumer confidence to its lowest level in five years.
The Conference Board, a business-backed research group, said Tuesday that its Consumer Confidence Index plunged to 64.5 in March from a revised 76.4 in February.
The March reading was far below the 73.0 expected by analysts surveyed by Thomson/IFR and was the worst reading since the gauge registered 61.4 in March 2003, just ahead of the U.S. invasion of Iraq.
Weakening consumer confidence foreshadows weakening consumer spending, which could hurt the already faltering economy.
Meanwhile, the Standard & Poor's/Case-Shiller home price index released Tuesday indicated that U.S. home prices fell 11.4 percent in January, the steepest drop since data for the indicator was first collected in 1987. The latest decline means prices have been growing more slowly or dropping for 19 consecutive months.
The weak readings initially depressed Wall Street, but trading later flattened out. In early afternoon trading, the Dow fell 10.26, or 0.08 percent, to 12,538.38. The Standard & Poor's 500 index and the Nasdaq composite index rose slightly.
The Consumer Confidence Index has been weakening since July and Lynn Franco, director of the Conference Board's research center, said further decline was likely. The survey by the New York-based Conference Board is based on a sample of 5,000 U.S. households.
"Consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon," she added.
Brian Bethune, chief U.S. financial economist with Global Insight in Lexington, Mass., expects the April confidence reading to be dreary, too.
"We expect overall payroll employment to decline for the third consecutive month ... and there is no immediate relief in sight for gasoline prices or other energy costs," he said in a research note.
That, he said, will mean "real consumer spending will barely creep forward in the first half of 2008," depressing the economy.
Economist Bernard Baumohl, executive director of The Economic Outlook Group in Princeton Junction, N.J., said consumers' pessimism "reflects the great anxiety that households have, because there are just so many uncertainties that everyone faces."
He believes the economy fell into recession in the current quarter and that growth probably won't resume until the second half of the year, after government stimulus programs have had a chance to work. These include measures by the Federal Reserve to boost credit markets and the plan by the Bush administration to distribute tax rebates starting this summer to encourage consumer spending.
The Fed on Tuesday said it had received bids of almost $89 billion for $50 billion in short-term loans offered in its latest auction to banks. So far, the Fed has made $260 billion in such loans since December to help ease credit conditions.
Baumohl said government actions should help the economy resume growth later this year, but that the recovery could be weak.
"Even if we emerge from recession sometime this summer, the second half of the year is going to feel bad," he said. "For most people, they won't be able to tell if the economy is growing 1 percent or shrinking 1 percent."