Confidence among American consumers is slumping, indicating that the damage from the housing contraction is pushing the economy toward a recession.

One measure - the Reuters/University of Michigan index of consumer sentiment - fell to 69.6 in February from 78.4 the previous month.

"We're seeing a clear pattern of sudden weakening in both consumer and business confidence, which frankly is the sign of a recession," said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut, who had the closest forecast for consumer sentiment in a Bloomberg News survey.

The reading on consumer sentiment was the weakest since February 1992. Economists had forecast the measure would fall to 76, according to the median of 66 projections in a Bloomberg News survey.

The decline in confidence indicates that pledges of tax rebates and lower interest rates failed to ease Americans' concerns about falling home and stock prices and rising unemployment. President Bush recently signed a $168 billion stimulus package, including tax rebates to more than 130 million households, after a deal with Democratic lawmakers.

"The economy is clearly softening," Alan Gayle, senior investment strategist at Trusco Capital Management in Richmond, Va., said in an interview. "We're starting '08 with modest, if any, economic momentum."

Economic growth slowed to a 0.6 percent pace in the fourth quarter, and the economy lost jobs in January for the first time in more than four years.

Capacity utilization, which measures the proportion of plants in use, was unchanged in January at 81.5 percent; the rate has averaged about 81 percent over the last 30 years.

Higher rates raise the risk of bottlenecks in production that can push up prices.