Consumer confidence drops to five-year low

Consumer confidence sank to a five-year low in March as tight credit markets, rising prices and worsening job prospects made many worry that the economy had fallen into recession.

The Conference Board, a business-backed research group, said its consumer confidence index plunged to 64.5 in March from a revised 76.4 in February.

That was far below the 73 expected by analysts surveyed by Thomson/IFR.

The index has been weakening since July and is watched because lower consumer confidence tends to result in lower consumer buying, which is a drag on the economy.

Lynn Franco, director of the Conference Board’s research center, said the latest index reading was the lowest since 61.4 in March 2003, just ahead of the U.S. invasion of Iraq.

“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.

There were steep declines in two companion indexes.

The present situation index, which looks at current conditions, slumped to 89.2 in March from 104 the month before.

The expectations index, which looks ahead, dropped to a 35-year low of 47.9 in March from 58 in February.

The last time the reading was that depressed was in December 1973, when it registered 45.2 amid the Arab oil embargo and Watergate scandal, the Conference Board said.

In the expectations appraisal, a growing number of consumers said they expected business conditions to worsen over the next six months.

On the labor market, consumers expecting fewer jobs increased to 29% in March from 28% in February, while those expecting more jobs declined to 7.7% from 8.9%.

The survey by the New York-based Conference Board is based on a sample of 5,000 U.S. households.