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Short recession seen
March 2, 2001: 1:31 p.m. ET

Michigan February consumer survey finds confidence not as low as feared
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NEW YORK (CNNfn) - About two-thirds of U.S. consumers believe we already are in a recession but they expect the economy to recover quickly, the University of Michigan's survey of consumer sentiment for February found, according to market sources.

The university releases its twice-monthly survey results to clients first, and will publish its results to the public Monday, but clients confirm that the final February reading on confidence fell to 90.6.

While that's off from a final January reading of 94.7, it is better than predictions of economists polled by Reuters, who had expected a final figure of 88.1. It's also an improvement from the preliminary index, reported two weeks ago, which came in at 87.8, the lowest level since November 1993.

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Consumer confidence is important because consumer spending accounts for about two-thirds of the U.S. economy.

The 17-point three-month drop in confidence from December through February is the largest since the last recession in 1990, analysts said.

"These data clearly show consumer attitudes at recessionary levels," said Steven Wood, economist with FinancialOxygen economic advisory service.

Consumers have been shaken by the fall in the U.S. stock market, widespread reports of layoffs and a true slowdown in some sectors, such as manufacturing, Wood said. But he points out consumer spending has stayed strong even while consumer confidence has fallen, which he believes will keep the U.S. economy out of a recession.

"I'm not even sure we're going to have a single quarter of negative growth," he said. "There seems to be disconnect between the way consumers feel and their spending pattern. As long as consumers continue to spend, even at a moderate rate, the economy should be able to avoid a recession."

graphicA recession is technically defined as two consecutive quarters of negative growth, and since the nation's economy has yet to post a single quarter of negative growth, it cannot technically be in a recession. Still, Woods says consumers are right to sense a significant slowing in the economy even if they don't understand the technicalities of the term recession. And he believes they are right to believe a turnaround is around the corner.

Meanwhile, the Michigan survey's February current conditions barometer, which measures how consumers feel about their present financial picture, fell to 105.8 from 107.7 in January. But it also bounced off its mid-month preliminary reading of 103.7.

The expectations index for February -- which looks to how consumers feel about the twelve months ahead -- fell to 80.8 from 86.4 in January, but also rose from a preliminary reading of 77.6.

The other leading measure of consumer confidence, published by the Conference Board, fell to a 4-1/2-year low in February, that private group reported Tuesday.

-- Reuters contributed to this report graphic