Fueled by less favorable business conditions and consumers reporting that jobs are hard to find, The Conference Board's Consumer Confidence Index (CCI) dropped more than 12 points in February to 75.0 from 87.3 in January.
The Conference Board Index is based on a representative sampling of 5,000 U.S. households. The monthly survey is conducted for The Conference Board by research group TNS.
Along with the CCI, the Expectations Index declined to 57.9 from 69.3 and the Present Situation Index decreased to 100.6 from 114.3 in January.
"With so few consumers expecting conditions to turn around in the months ahead, the outlook for the economy continues to worsen and the risk of a recession continues to increase," said Lynn Franco, director of the Conference Board Consumer Research Center.
Brian Bethune, U.S. Economist for research group Global Insight, agreed with Franco's assessment. Bethune said The Conference Board Index collapsed in February, corroborating the evidence from other key measures of consumer confidence that consumer moods soured to "recessionary levels" in the first two months of 2008.
"Sharp drops in equity prices, further downward pressure on home prices, and persistent upward pressure on gas prices and heating costs combusted together to send sentiment down sharply," he explained.
Bethune sees no end in sight and said the economists at Global Insight expect to see further downward pressure on home prices and upward pressure on gas prices in the next few weeks.
"The trough in consumer confidence appears to be several months away," he concluded.
The bleak economic news also made its way to Congress today, as the House Financial Services Committee heard from a panel of economists this morning in preparation for Fed Chairman Ben Bernanke addressing the group tomorrow morning.
Mark Zandi, chief economist of Moody's Economy.com, told Congress that the economy is likely in the midst of a recession. He said real GDP slowed sharply during the last quarter of 2007, and the economy appears to be contracting in early 2008.
"The job market has stalled, retailers are struggling, and manufacturing activity is weakening," Zandi told Congress, adding that the most fundamental source of the economy's problems is the unprecedented housing downturn and resulting surge in mortgage loan defaults and foreclosures.
Zandi said housing activity peaked nearly three years ago. He said since then home sales have fallen by about 35 percent, housing starts by nearly 60 percent, and home prices by 10 percent.
Alice M. Rivlin of the Brookings Institution and Georgetown University was cautiously optimistic that the economy can avoid recession after sustaining slow growth for a couple more quarters. However, she cautioned Congress that a spreading wave of foreclosures could further undermine consumer confidence and increase the probability of recession.
"Continued risk aversion of investors and unwillingness to lend on the part of financial institutions could raise the probability [of recession] even more and turn a slowdown into a full-blown economic rout that could spread beyond our borders, Rivlin said."
"The hardest challenges now are how to minimize housing foreclosures and how to get the credit markets functioning more normally -- both without spending excessive public resources or rewarding people who made dumb or irresponsible decisions," she concluded.
According to Zandi, there were 550,000 first mortgage loans in default as of the end of January 2008. This equates to some 2.2 million defaults at an annualized pace.
Zandi predicts well over 3 million mortgage loan defaults this year and next. Of these, 2 million homeowners will go through the entire foreclosure process and ultimately lose their homes.
The mortgage meltdown and housing downturn is undermining consumer spending, said Zandi. He said even a modest pullback by consumers will push the economy into recession, as such spending accounts for 70 percent of the nations GDP.