WASHINGTON – Confidence in the economy dropped to a new low as worries about a possible recession, persistent problems in the housing and credit markets and lofty energy prices put people in a more gloomy mind-set.
According to the RBC Cash Index, confidence sank to a mark of 33.1 in early March, down from 48.5 in February. The new reading was the worst since the index began in 2002 and surpassed the previous low reached in February.
"The U.S. consumer is definitely in full defensive mode," said T.J. Marta, a fixed-income strategist at RBC Capital Markets.
The continued deterioration in confidence comes even as Federal Reserve Chairman Ben Bernanke has signaled that the central bank will keep on cutting a key interest rate to bolster the economy. Congress and the White House, meanwhile, have speedily enacted a relief package that includes tax rebates for people and tax breaks for businesses. Rebates of up to $600 for individuals or $1,200 for married couples should start going out in May.
Over the past year, consumer confidence has fallen sharply, underscoring the toll of the ailing housing market and a credit crunch that has made it more difficult for people to secure financing for big-ticket purchases such as homes and cars. Last March, confidence stood at 92.3. The index is based on results of the international polling firm Ipsos.
"We've gotten to a point where there's very little for the consumer to cheer about. Everywhere you look -- homes, grocery stores, gasoline stations -- there are things that are all weighing on consumer attitudes," said Richard Yamarone, economist at Argus Research. "You have soaring energy and food prices, rising home foreclosures and uncertainties about the jobs climate. When you mix it altogether it is a recipe for miserable consumer sentiment," he said.
All the economy's problems have contributed to low approval ratings for President Bush. His approval rating on the economy was just 31 percent, according to a separate Associated Press-Ipsos poll. Bush's overall job-approval rating stayed at 30 percent, the same as last month, which was a record low, the poll said.
A measure looking at consumers' feelings about current economic conditions fell to 54.7 in early March, down from 63.6. The new reading was the lowest in six years of records.
Oil prices closed at a new record high of $105.47 a barrel on Thursday. Gasoline prices also marched higher. The national average price of a gallon of gas rose to $3.185, according to AAA and the Oil Price Information Service. Gas prices are expected to peak this spring well above last May's record of $3.227 a gallon.
Home foreclosures, meanwhile, jumped to a record high in the final quarter of last year and are likely to keep on rising.
Against this backdrop, individuals' sentiments about the economy and their own financial standing over the next six months sank deeper into negative territory. This gauge plunged to a negative 41.6 in early March, down from a negative 7 in February. The new reading also was the worst on record.
Another gauge of attitudes about investing, including comfort in making major purchases, dropped to 56.7 in early March, down from 62.6 in February. The new figure also was the lowest on records going back to 2002. Turbulence on Wall Street and decline in home values -- generally a homeowner's single-biggest asset -- are taking their toll on people's sense of financial well-being, analysts said.
Economists keep close tabs on confidence barometers for clues about consumers' willingness to spend.
The big worry is that consumers will cut back sharply on their spending, throwing the economy into a tailspin.
However, there was some reason to be hopeful that shoppers won't collapse -- even if they are feeling anxious about the economy.
The nation's retailers, reporting sales results on Thursday, got a bit of a reprieve. Shoppers cautiously returned to malls, after retrenching in recent months. Among the big winners: discounters like Wal-Mart Stores Inc., whose results beat expectations.
Still, as retailers reported mixed February sales results, it was clear that shoppers weren't splurging but rather focused on necessities, like groceries and low prices. Among the weakest performers were apparel stores such as Gap Inc., Limited Brands Inc. and J.C. Penney Co.
Another measure tracking consumers' feelings about employment conditions fell to 99.2 in early March, down from 101.3 in February. The new reading was the lowest since early October 2003.
The RBC consumer confidence index was based on the responses from 1,013 adults surveyed Monday through Wednesday about their attitudes on personal finance and the economy. Results of the survey had a margin of sampling error of plus or minus 3 percentage points. The overall confidence index is benchmarked to a reading of 100 in January 2002, when Ipsos started the survey.