Consumer Confidence Wanes; Import Prices Rise

Americans’ confidence in the economy has withered in the last few weeks, falling to the lowest level since the recession of the early 1980s.

A series of recent financial shocks, including the meltdown of the investment bank Bear Stearns, and a significant weakening in the labor market appears to have weighed heavily on Americans who fear a prolonged and severe slowdown in the economy, according to a survey released Friday by Reuters and the University of Michigan.

Americans have a bleaker outlook than any time since July 1980, the tail end of the stagflationary era that plagued the country for years.

Confidence about the current financial situation fell to a 26-year low.

“I think we should be hunkering down for an extended period of very weak consumption,” said Ian Shepherdson, a London-based economist at the research firm High Frequency Economics.

That would mean a rough patch ahead for the nation’s economy, more than two-thirds of which is driven by consumer spending.

The survey showed that Americans are also bracing for rising prices, reflecting fears of a situation similar to the 1970s, where higher inflation is twinned with slowing growth.

Reinforcing those concerns, a government report on import prices showed that the cost of foreign goods rose 2.8 percent in March. In the last 12 months, import prices are up nearly 15 percent, the highest year-over-year increase since records began in 1983, the Labor Department said on Friday.

The surge came on the back of record-high oil prices, but the costs appear to have seeped through into other goods. Excluding all fuel-based products, prices are up 5 percent since March 2007, though that gauge includes the cost of food, which has soared in the last year.

Prices of imported capital goods have grown 1 percent in the last year, a sign that the price pressures are mostly in commodities.

Export prices increased 1.5 percent in March, adding to an 8 percent rise in the last 12 months, with the biggest increases in food and agricultural products.

With import costs rising twice as fast as exports, many American businesses may be losing money on global trade. The United States trade deficit unexpectedly widened in February, its second consecutive month of growth.