Driven by recession fears, consumer confidence fell to its lowest level in four years in January, according to a Conference Board report released Tuesday.
The Consumer Confidence Index dropped more than 14 points to 114.4, the lowest level since December 1996, when it was 114.2, the Conference Board said.
The decline in confidence raises new worries about the economy, with consumers decidedly more pessimistic about business and employment conditions, said Lynn Franco, director of the Conference Board's Consumer Research Center.
"Since apprehension leads to caution and cautious consumers spend less than the confident ones, confidence levels in February will be carefully watched," Franco said. "Further erosions in consumer confidence will create more serious concerns about the overall health of the economy."
Federal Reserve Board Chairman Alan Greenspan has cited consumer confidence as one factor that could lead to a recession. The Fed is expected to reduce interest rates Wednesday in a bid to spur an economy whose growth Greenspan has described as "close to zero."
U.S. markets were moderately lower following the release of the report Tuesday morning, with the Dow Jones industrial average off 9 points to 10,692 and the Nasdaq composite index off 21 points to 2,817.
The Conference Board index, based on a monthly survey of some 5,000 U.S. households, is considered a key indicator because consumer spending accounts for about two-thirds of the nation's economic activity. The index compares results with its base year, 1985, when it stood at 100.
Consumer confidence, which rested at a revised level of 128.6 in December, has fallen sharply since the index hit 142.5 in September.
The Conference Board said consumers' expectations for the next six months have worsened. Of those surveyed, 15.7 percent expect business conditions to worsen, compared with 10.1 percent last month. Meanwhile, only 12.4 percent of consumers expect conditions to improve, down from 16.9 percent last month.
About 21.8 percent of consumers expect fewer jobs to become available, up from 15.7 percent in December, the Conference Board said.
The Associated Press contributed to this report