Consumers' confidence in the economy, apparently undermined by the federal government's budget crisis and higher oil prices, took its steepest plunge on record in October, the Conference Board reported yesterday, reaching its lowest point since the depths of the 1982 recession.

Another organization that polls consumer sentiment, the Survey Research Center at the University of Michigan, also will report a decline in its measure next week, though not as large.

The Conference Board index, based on responses of 5,000 households to questions about business conditions, the job outlook and their own buying plans, fell 28 percent in October.

Consumer confidence is considered a key indicator of the economy's future.

Consumers' spending accounts for a large portion of total economic activity, and people who feel uncertain are likely to spend less.

And for the past year, it is consumer spending, economists say, that has kept the nation out of recession.

"The consumer is the best economic forecaster around," said Fabian Linden, who runs the monthly survey for the board, a New York-based business-supported research organization. "The drop in October was quite a disenchantment."

The index, which dropped to 61.3 from 85.6 (the board uses 1985 as the base year of 100), has been declining for nearly a year.

In October 1989 it was nearly twice its current level. It took a sharp dive from July to August, stayed flat in September and then plummeted in October.

The last time it was this low was January 1983, Linden said.

Some analysts said there were some ambiguous qualities to today's consumer sentiment.

In the Conference Board's survey, households were more pessimistic about the economy's prospects and said they planned to curtail their buying plans.

But the Michigan survey has been finding a gap between the relatively positive feelings consumers have about their own financial situation and their deep concern for the economy as a whole.

"What you are seeing here reflects psychological issues more than economic issues," said Bernard Campbell, senior economist with DRI/McGraw-Hill.

"When people look at things like the wrangling over the federal budget, they probably think these things are bad for the economy, but they don't understand how they could be bad for them."

And, in fact, figures show that consumer spending has stayed fairly stable or risen in recent months.

On the other hand, Campbell pointed out, the new wave of no-confidence could reduce consumer spending in the future.

"If the consumer says the economy is bleak, then it will be," Campbell said.

The economy is affected by attitudes in part because consumers also are business people.

An executive who passes the same "For Sale" signs in front of houses on the way to work each day is less likely to increase hiring, or embark his or her company on a new product line.

Linden said the struggle between the White House and Congress to reach a deficit-reduction agreement, which has stalemated the government for more than a month, may have been the principal factor behind the index's decline.

Such other events as the Persian Gulf crisis and the rise in oil prices, while also responsible for the drop, were underway before the October plunge, he said.

"A contributing factor may well have been the comedy over the budget," he said. "It's a pretty unsettling thing for people to watch on their television sets every night."