WASHINGTON - Consumers turned in the weakest spending performance in 17 months in February, while their confidence dropped to the lowest level in 16 years, raising further fears of a recession.
The Commerce Department said Friday that consumer spending edged up by just 0.1 percent last month, the poorest showing since September 2006. And if the effects of inflation are removed, spending was flat in February, the third consecutive month of sluggish activity.
Meanwhile, a second report showed the prolonged slump in housing, rising job layoffs, soaring energy costs and a severe credit crisis are taking their toll on consumer confidence. The Reuters/University of Michigan consumer sentiment survey dropped to 69.5 in March.
That was down from 70.8 in February and represented the lowest reading in 16 years, which analysts said was not surprising given all the problems battering households presently.
'Food and energy prices are climbing ever higher, the labor market is slowing, credit is becoming tighter and household wealth is declining as house prices drop,' said Nigel Gault, senior U.S. economist at Global Insight. 'Consumers are facing bad news on all fronts.'
The concern is that all these problems will cause consumer spending - which accounts for two-thirds of total economic activity - to weaken even further, bringing on a full-blown recession.
'At the moment, consumers are very pessimistic,' said Mark Zandi, chief economist at Moody's Economy.com. 'We are losing jobs, the stock market is down, house prices are crumbling, gasoline prices have hit new record highs and it costs a lot more to buy a loaf of bread. Nothing is going well.'