US consumer mood at 26-year low

US consumer sentiment is now at its lowest level in 26 years, a closely-watched survey has found.

With sentiment knocked by recession fears, the University of Michigan's index of confidence fell to 63.2 for April from 69.5 in March.

This month's figure is the lowest since March 1982, when the US economy was deep in an economic downturn.

It is just the latest study to show that US consumer confidence has fallen sharply in recent months.

The news hit the markets, with America's main Dow Jones index ending Friday down 2%, while the Nasdaq gave up 2.6%.

'Recession territory'

"There have only been a dozen other surveys that have recorded a lower level of consumer sentiment in the more than 50-year history of the survey," said the University of Michigan.

"It confirms what we already know, that we are in consumer-led recession, and it's going to be a pretty protracted one"
Carl Lantz, Credit Suisse

It found that respondents were concerned about "persistently high food and fuel prices, as well as rising unemployment".

The figure for April was much worse than analysts' expectations.

"We are definitely in recession territory," said Carl Lantz of Credit Suisse.

"It confirms what we already know, that we are in consumer-led recession, and it's going to be a pretty protracted one."

Bad debt

The increasing indications of possible recession in the US first started last summer when the revelation of billions of dollars of bad debt in the US housing market sparked the current credit crunch.

With banks much less willing to lend to each other, businesses and consumers, the credit squeeze has spread to the wider economy.

With consumer sentiment hit further by high food and fuel prices, it is starting to hit retail spending, which is the main bedrock of the US economy.

US Treasury Secretary Henry Paulson admitted earlier this week that the US economy has "turned down sharply".

To try to alleviate the situation, the Federal Reserve, the US central bank, has now cut interest rates six times since mid-September.

RELATED INTERNET LINKS
University of Michigan
The BBC is not responsible for the content of external internet sites