Falling consumer confidence in America allied to the continued drop in house prices is pointing to the lowest level of spending since the 1950s, official data showed yesterday.

According to the Conference Board's consumer confidence index, the outlook of Americans last month was the most gloomy since October 1992, with expectations for the future declining even further.

Economists said that, if their expectations are borne out, consumption would fall by 2.5 per cent - the worst decline since 1959. Consumer demand accounts for two thirds of US economic growth.

At the same time, new data showed that house prices are falling almost five times as quickly as in the last US recession in 1991.

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According to the S&P/Case-Shiller US house price index, residential property values fell 14.4 per cent over the first quarter of 2008 compared with the year before. The decline marks the worst performance since the index began 20 years ago.

Ian Shepherdson, at High Frequency Economics, the market analyst, said: “A combination of falling home prices, soaring food and energy prices, the credit crunch and the worsening labour market is killing consumers.”

In March, Las Vegas suffered a 4.4 per cent drop in property values, while homes in Miami fell 4.5 per cent. Over the year, Las Vegas homes have lost 25.9 per cent of their value.

Also in March, home prices across New York state fell 1 per cent, sparking fears that the layoffs on Wall Street are beginning to bite into the Manhattan property market.

The co-founder of the index, Robert Shiller of Yale University, and a number of Wall Street economists expect the decline to double before any recovery.

Mr Shepherdson said: “The Case-Shiller 20-city home price index fell 14.4 per cent in the year to March, worse than the 13.9 per cent consensus and the biggest drop ever recorded. We see no grounds yet to expect less bad numbers. Inventory of existing homes is still very close to its record high, so prices will continue to fall rapidly. Since its peak in May 2006 the Case-Shiller index is down 15.7 per cent. We expect the peak-to-trough drop to reach 25 to 30 per cent.”

The S&P/Case-Shiller index is calculated by monitoring house prices for single family homes from 20 metropolitan areas. It is widely perceived as the authoritative measure for residential real estate across America.

David Blitzer, chairman of S&P's index committee, said that the 14.4 per cent fall compared badly with the 2.8 per cent decline experienced during the 1991 recession.

He said: “There are very few silver linings that one can see in the data. Most of the nation appears to remain on a downward path.”

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