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updated 3/29/2011 1:03:43 PM ET 2011-03-29T17:03:43

U.S. shoppers' worries about juggling rising gas and food prices and other household costs flared up in March, pushing a closely watched barometer of sentiment down sharply.

The sharp decline, which followed a three-year high in February and reversed five straight months of improvement, raises questions about shoppers' ability and willingness to spend in coming months.

The Conference Board's Consumer Confidence Index fell more than expected to 63.4 from a revised 72.0 in February. Economists expected a decline to 65.4, according to FactSet.

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The drop of nearly nine points was the steepest since the 10.1-point plunge from January 2010 to February 2010. That decline was in part triggered by worries about Greece's national debt, which hammered the U.S. stock market.

The index measures how Americans feel about business conditions, the job market and the next six months. It has hovered in a tight range from the high 50s to low 60s over the past year.

A reading of 90 indicates a healthy economy. The index hasn't approached that level since the recession began in December 2007.

Shoppers' outlook over the next six months worsened. The part of the index measuring those expectations fell to 81.1 from 97.5 last month. The other gauge, which measures how consumers feel now about the economy, improved to 36.9 from 33.8 in February.

Economists monitor confidence because consumer spending, including big-ticket items such as housing and health care, accounts for about 70 percent of U.S. economic activity and is critical for a strong rebound.

"Consumers' inflation expectations rose significantly in March and their income expectations soured, a combination that will likely impact spending decisions," Lynn Franco, director of The Conference Board Consumer Research Center, said in a statement.

Japan's earthquake, tsunami and the nuclear crisis likely rattled U.S. confidence too, Franco said, but those kinds of shocks don't typically last long.

The earthquake hit Japan on March 11, five days before the end date for the Conference Board's survey.

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But what really affects confidence is "what's happening in the home front," she said. Higher prices in gas and food are "daily constant reminders to consumers," she added.

"There is a sort of diminished sense of purchasing power," she said.

Signs of financial strain emerged Monday in February's consumer spending report, which showed that most of the 0.7 percent jump in spending went to cover higher gas prices. Although personal income and rose 0.3 percent for February, after-tax incomes actually fell 0.1 percent after adjusting for inflation.

The government's February jobs report, released this month, showed companies added more workers in February than in any month in almost a year, and unemployment fell to 8.9 percent, the lowest in almost two years.

But higher oil prices, violence in the Middle East and North Africa and Japan's nuclear crisis could frighten U.S. companies out of taking any risks, says Mark Vitner, a senior economist with Wells Fargo. A pullback in hiring could show up in job reports this summer, he said.

Story: Home prices falling in most major U.S. cities

As for consumer spending, analysts say March has been uneven after seeing strong spending for the holiday shopping season extend into January and February.

The national average for a gallon of gas hit $3.584 (95 cents a liter) Monday, the highest ever for this time of year, according to AAA, Wright Express and the Oil Price Information Service. Gasoline prices have jumped 25.1 cents a gallon in the past month and 78.1 cents from a year ago.

Food prices are expected to increase 3 to 4 percent on average this year, with the increases seen sharply in dairy, meat and coffee. Clothing retailers are also raising prices on goods as they face soaring costs in labor in China and raw materials like cotton.

A troubled housing market is also weighing on shoppers.

Home prices are falling in most major U.S. cities, and the average prices in four of them are at their lowest point in 11 years, according to Standard & Poor's/Case-Shiller report released Tuesday. On Friday, the Commerce Department said new-home sales plunged in February, the third month in a row.

The Conference Board survey, conducted by The Nielsen Co., is based on a random survey mailed to 3,000 households from March 1 through March 16.

The Associated Press and Reuters contributed to this report.

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