Print

Email story

Comment

Letter to the editor

Confidence slips, hurts consumer spending

A report attributes a spending increase to a surge in inflation.

WASHINGTON - Consumer spending is threatening to stall out while consumer confidence, battered by soaring energy costs and falling home prices, has taken a steep nosedive.

Analysts said the two new reports Friday were just the latest danger signals that the country was edging perilously close to a recession.

"The job market is weakening, house prices are plunging, stock prices are down and gasoline prices are headed higher," said Mark Zandi, chief economist at Moody's Economy.com. "The weight on consumers is growing increasingly heavy and their spending reflects that."

The Commerce Department reported that spending posted a 0.4 percent rise in January, better than economists had been expecting. However, all of that gain came from a surge in inflation during the month.

Taking away the effect of rising prices, spending showed no gain in January, the second straight month that real spending failed to advance.

Meanwhile, another survey indicated that consumer confidence took a big drop in February. The Reuters/University of Michigan final reading on consumer sentiment fell to a reading of 70.8 in February, the lowest final monthly reading in 16 years and down sharply from 78.4 in January.

[Last modified March 1, 2008, 00:53:24]