There are two competing positions on consumer sentiment right now. One is that it turned south last week, as people worried about their jobs – always a bad sign for spending. The other is that consumer sentiment didn't crap out in July: it fizzled in May. So, it's not a question of whether consumers aren't confident in the U.S. economic machine, it's just a matter of when the collective mood changed.

The July camp is set up around the Reuters/University of Michigan Surveys of Consumers, which makes now the weakest point for consumer sentiment since March. Those who favor May look to domestic demand for foreign goods, which went soft two months ago, bringing the monthly trade deficit to its narrowest since 1999. The U.S. trade gap unexpectedly tightened to $26 billion in May, with exports up 1.6% and imports down 0.6%, according to the U.S. Department of Commerce.

U.S. consumer confidence in early April 2008 plunged to its lowest level in 26 years, suggesting American adults are becoming more concerned about the near-term health of the U.S. economy as it slides into its first recession in six years.

The Reuters/University of Michigan Surveys of Consumers said its preliminary index of confidence fell to 63.2 in April 2008 from 69.5 in March 2008. It was the index's lowest reading since it fell to 62.0 in March 1982.

Economists surveyed by Bloomberg News had predicted that the April 2008 index would fall to 69.

Meanwhile, the index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, fell to 53.4 in April 2008 from 60.1 in March 2008. It was the expectations index's lowest reading since November 1990, Reuters reported Friday.

'A really bad number'

Economist Peter Dawson, who did not participate in the survey, told BloggingStocks Friday there's no way to sugarcoat the latest consumer sentiment reading. "It's a really bad number. Just awful. Consumers are expressing serious concern about high gasoline, oil and food prices, the threat of job layoffs, and the general the state of the economy," Dawson said. "Given that consumer spending a represents about two-thirds of economic activity, it doesn't bode well for the economic recovery timetable."

With the above in mind, Dawson said those who expect a U.S. economic recovery to start as early as Q3 2008 "are at the extremely optimistic end of the recovery spectrum."