Americans' confidence in the economy has withered in the past few weeks, falling to the lowest level since the recession of the early 1980s.
A series of recent financial shocks, including the meltdown of the investment bank Bear Stearns, and a significant weakening in the labor market appears to have weighed heavily on Americans who fear a prolonged and severe slowdown in the economy, according to a survey released yesterday by Reuters and the University of Michigan.
Americans have a bleaker outlook than any time since July 1980, the tail end of the stagflationary era that troubled the country for years. Confidence about the current financial situation fell to a 26-year low.
"I think we should be hunkering down for an extended period of very weak consumption," said Ian Shepherdson, a London-based economist at the research firm High Frequency Economics.
That would mean a rough patch ahead for the nation's economy, more than two-thirds of which is driven by consumer spending.
The survey showed that Americans also are bracing for rising prices, reflecting fears of a situation similar to the 1970s, where higher inflation is twinned with slowing growth.
Reinforcing those concerns, a government report on import prices showed that the cost of foreign goods rose 2.8 percent in March. In the past 12 months, import prices are up nearly 15 percent, the highest year-over-year increase since records began in 1983, the Labor Department said yesterday.
The surge came on the back of record-high oil prices, but costs appear to have seeped through to other goods. Excluding all fuel-based products, prices are up 5 percent since March last year, though that gauge includes the cost of food, which has soared in the past year.
Prices of imported capital goods have grown 1 percent in the past year, a sign that the price pressures are mostly in commodities.
Export prices rose 1.5 percent in March, adding to an 8 percent rise in the past 12 months, with the biggest increases in food and agricultural products. With import costs rising twice as fast as exports, many U.S. businesses may be losing money on global trade. The U.S. trade deficit widened in February, its second consecutive month of growth.