Their outlook for business conditions in the latest Consumer Confidence survey suggests further weakening on the horizon, and the latest information regarding the decline in U.S. home prices adds to consumers' misery.
The Conference Board Consumer Confidence Index in February fell to 64.5, the lowest since March 2003, shortly before the U.S. invaded Iraq, when it was 61.4.
The two components of the Index both declined sharply, with the Present Situation Index dropping to 89.2 from 104 last month and the Expectations Index falling to 47.9 from 58. The Expectations Index, a forward-looking indicator that looks ahead by six months, is at a 35-year low from December 1973 when it was 45.2 and the news of the day then was the Middle East oil embargo and the Watergate scandal.
"Consumers' confidence in the state of the economy continues to fade," said Lynn Franco, director of The Conference Board Consumer Research Center.
"Consumers' assessment of the economy continued to move in the direction of our recession and inflation themes. The net jobs reading points to a rise in unemployment and a further fall in payrolls in March. In addition, the one-year inflation expectations index is higher than at any time since the 1990-1991 recession, with the exception of the post-Katrina energy-related spike," said Bear Stearns economist John Ryding.
Separately, the Standard & Poor's Case Shiller home price index for January, released on Tuesday, indicated that home prices in the U.S. fell by 11.4 percent in January, reflecting a slowdown thus far of 19 consecutive months.
"We continue to expect a 15 percent decline in home prices in 2008 and a further 10 percent drop in 2009, a correction needed to bring the housing market back into supply-demand balance," said Merrill Lynch economist David Rosenberg. He noted that home price deflation remains very broadly based, with every city in the index seeing a decline in home prices over the past three months and only Charlotte, N.C., up on a yearly basis.
"Housing is very weak, gas prices are soaring and lately job growth has sputtered....Additionally, the news from financial markets and the discussions of bankruptcy for a handful are fanning concerns among consumers," said Société Générale economist Stephen Gallagher.