Washington, March 23 (Bloomberg) -- The buildup to war with Iraq and bleak job prospects contributed to a drop in spending in February and undermined consumer confidence this month, reports this week are expected to show. March consumer confidence fell to the lowest since October 1993, economists said they expect the Conference Board to report Tuesday. A report from the University of Michigan Friday will probably verify that reading, showing its confidence index at an 11-year low, a survey of economists found. Snowstorms last month probably helped produce a second consecutive monthly decline in household spending, which accounts for more than two-thirds of the economy. The onset of war has raised expectations of a quick end to the conflict and has caused oil prices to retreat. That may cause confidence and spending to rally in coming months, economists said. ``The economy is stuck in neutral waiting for a resolution'' to the war, said Stan Shipley, a senior economist at Merrill Lynch & Co. in New York. ``The war will probably go pretty well and there will be a round of patriotic growth late in the second quarter and early in the third.'' The Conference Board, a New York-based research group, will probably report that its March index of consumer confidence fell to 62 from 64 last month, based on the median of 47 forecasts in a Bloomberg News survey of economists. A decline would be the 10th in 11 months. The index is based on a survey of 5,000 households about general economic conditions, employment prospects and spending plans.
Spending Decline
The University of Michigan will probably report Friday a final index of 75 in its measure of consumer sentiment, a survey of economists found. That would be the same as a preliminary reading reported March 14, the lowest since October 1992. The Michigan index, based on a survey of 500 households, was at 79.9 in February. Americans probably spent 0.2 percent less on goods and services last month, after a 0.1 percent decline in January, economists expect the Commerce Department to report Friday. The worst Northeast snowstorm in seven years and worries about war and jobs led to declines in sales at auto dealers and at appliance, clothing and furniture stores, the economists said. Personal spending hasn't dropped for two straight months since December 1990-January 1991, when the economy was in recession. Automakers expect sales to remain slow until military action against Iraq is complete. Demand for vehicles in the first half of March indicated sales will slow to a 15.25 million-vehicle annual pace from a 15.4 million clip in February, according to J.D. Power & Associates, an industry consulting and data firm.
Rebound in Auto Sales?
Should the war end in success, ``we do expect to see a little stronger economy in the back half of this year and therefore some firming up in demand for vehicle sales,'' said Paul Ballew, General Motors Corp.'s' director of market analysis. Because of the declines in consumer spending and confidence, companies are ordering fewer goods to avoid getting stuck with unwanted stocks. Bookings for products made to last more than three years, such as computers, industrial machinery and autos, probably fell 1.5 percent in February, the third drop in the last four months, economists said. Excluding transportation equipment, the Commerce Department report on durable goods orders Wednesday is expected to show a 1 percent decline, the first drop in three months, based on a Bloomberg News survey. Record low mortgage interest rates last month didn't keep bad weather and war jitters from slowing home sales, which have been a pillar of the economy. The poor job market and fading confidence are also weighing on the market, economists said.
Housing Sales Decline
Sales of previously owned homes probably dropped to a 5.8 million annual rate last month, economists expect the National Association of Realtors to report Tuesday. That would be down from a record 6.09 million-home pace in January and would compare with a record 5.57 million homes sold last year. March sales of new homes probably rose to a 925,000 annual rate from February's 914,000, the lowest in a year, according to the median forecast of economists in the survey. The Commerce Department is to issue that report Wednesday. A record 976,000 new homes were sold in 2002. ``Although winter weather may have been responsible for pulling new home sales off of their record levels at the end of last year, anecdotal evidence suggests that the peak in home buying has already passed,'' said Steven Wood, principal economist at Insight Economics LLC in Walnut Creek, California. In its final estimate of fourth-quarter gross domestic product, the Commerce Department is expected Thursday to say the total value of all goods and services produced in the U.S. expanded at a 1.4 percent annual rate, economists said. That would confirm the government's previous estimate that the final three months of last year had the weakest growth since the third quarter of 2001. Also Thursday, the Labor Department will probably report that first-time jobless claims held above 400,000, a level economists say is consistent with a weak job market, for a sixth straight week. Claims probably totaled 420,000, for the week ended Saturday, compared with 421,000 a week earlier. //www.quote.bloomberg.com