updated 4/15/2005 11:19:18 AM ET 2005-04-15T15:19:18

U.S. consumers felt less confident about economic conditions in April than in March as gasoline prices soared, reinforcing nascent concerns that growth in the United States may be on the brink of a slowdown.

Major Market Indices

The University of Michigan said its measure of confidence slid to 88.7 so far this month from 92.6 in March, according to market sources who saw the subscription-only report. Analysts had forecast a more modest dip to 91.5.

The decline in confidence largely reflects record prices at the gasoline pump, which could trigger a host of economic problems for a nation whose consumers rely so heavily on cars.

“It seems that at least on the surface that higher oil prices are having an effect on both businesses and consumers,” said Elisabeth Denison, economist at Dresdner Kleinwort Wasserstein. “So the momentum of economic activity going into the second quarter is less vigorous than we expected.

Consumer spending is the backbone of the U.S. economy, accounting for two-thirds of overall activity, so a drop in confidence could be a precursor to softer growth.

The Michigan survey was only the latest piece of evidence that tougher times may be ahead for the world’s largest economy after around two years of robust growth.

Earlier this week, retail sales figures for March suggested consumers were finally beginning to retrench while a record trade deficit indicated domestic demand for imported goods was far outpacing foreign interest in American products.

Given that reality, many on Wall Street have begun revising down their forecasts for first-quarter gross domestic product, predicting an expansion closer to 3.5 percent rather than the 4 percent consensus that had prevailed until this week.

While oil prices have pulled back closer to $50 a barrel this week, many analysts believe that supply fundamentals and geopolitical realities continue to hint at yet another rebound in energy costs.

The sudden downturn in economists’ views this week was so severe that financial markets had been bracing for an even worse sentiment number.

Treasury bonds, which as a safe-haven tend to benefit from adverse economic conditions, pared early gains, with the yield on ten-year notes trading near a six-week low at 4.31 percent.

Data on expectations from Michigan fell to 79.0 from 82.8, while perceptions of current conditions tumbled to 103.9 from 108.


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