Consumers think the U.S. economy is in a recession, and they're probably right if history is any indicator, according to the latest Index of Consumer Sentiment, released Friday morning.

"A recession has occurred whenever the Sentiment Index has declined as much as it has fallen during the past year, including the recessions occurring from the mid-1950s to the early 2000s," according to a statement by Richard Curtin, director of the Reuters/University of Michigan Surveys of Consumers, which conducts the monthly survey.

Consumers were nearly unanimous, the survey reported, in their opinion that the economy already is in a recession. The 86 percent of consumers surveyed who said the economy was in a recession was the highest level recorded since the early 1980s. Three-fourths of the respondents said they expected bad financial times for the national economy for the next year. That level of response has only been recorded during earlier recessions.

Mirroring faltering consumer confidence reports earlier this week from the U.S. Census Bureau, the Sentiment Index was at 69.5 in March, down from 70.8 in February, and from a recent peak of 96.9 in January 2007. The Index of Consumer Expectations, which measures consumers' thoughts about the economy in the coming year, and is a closely watched component of the Index of Leading Economic Indicators, was at 60.1.

In February, the index was at 62.4. At a recent peak in January 2007, it was 87.6. Since that peak, the expectations index has dropped by 31 percent. It fell by 24 percent before the 1990 recession and by 30 percent preceding the 2001 recession.  

More households reported in March that their financial situation had gotten worse than anytime since 1991. More consumers blamed high fuel and food costs for their financial difficulties than in any month for more than a quarter century. More than half of the consumers surveyed said they expect unemployment to go up during the next year.

Declining home values were another source of significant concern for consumers. Among all homeowners, 36 percent reported that the value of their home had gone down during the past year. That's the highest reported frequency at any time since the survey began asking the question 20 years ago. Two years ago, just 3 percent of homeowners said the value of their home had declined. Just under one-fourth of homeowners said the value of their home had gone up in the last year, a percentage that peaked at 76 percent in mid-2005.

As a result, consumers have become much more cautious in their spending and are shifting more of their income to repaying debt and building up savings. The administration's tax rebates should hold off additional spending declines in the third quarter of 2008, giving consumers the ability to spend some money that otherwise would have gone to shoring up their finances. That goal has become much more prominent.

"Consumers are now more in favor of repaying credit cards and rebuilding their reserve funds so that they can have the needed financial flexibility to handle any future twists and turns in the economy," Curtin said in the statement.

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