Recession Weighs on Home Prices, Consumers

Analysts had been expecting the index to be flat or even improve. But while falling fuel prices have given consumers some relief, it was not enough to offset fears about the deepening recession and mounting layoffs, analysts said.

Confidence was lowest in New England and highest in the South, including Texas and Oklahoma, according to the survey. But pessimism about the economy deepened across the country, including the south Atlantic region that includes Washington.

"People's fears appear to be racing ahead of reality now. I am not saying reality is good, but they are finding things to be afraid of that aren't even there anymore," said Ratajczak of Morgan Keegan.

With unemployment rising, consumers' assessment of the labor market worsened, with 42 percent saying jobs are "hard to get," compared with 37 percent in November, according to the survey of 5,000 households. Those who considered jobs "plentiful" fell to about 6 percent from nearly 9 percent. Meanwhile, those expecting business conditions to worsen during the next six months increased to 33 percent from 28 percent.

"The thing that people are [feeling] about this recession is the pervasiveness, the broad-based nature of it," said Steven Ricchiuto, chief economist for Mizuho Securities USA. "The last two recessions were confined to one industry, this recession is cutting across all sectors."

There were some signs of potential consumer resilience: The percentage of those surveyed planning to buy a car in the next six months inched up to 4.7 percent from 3.8 percent. A larger percentage also expected to buy a major appliance, such as a refrigerator or washing machine. Those planning to buy a home increased to 2.5 percent, up from 2.1 percent.

But those small moves do not represent a turnaround and may never manifest themselves, analysts said. "Buying plans improved slightly in December but were still quite weak," Abiel Reinhart, a J.P. Morgan Chase analyst, said in a research note yesterday.