Ahead of the Bell: Consumer Sentiment

The preliminary Reuters/University of Michigan monthly index of consumer sentiment will be released Friday at 10 a.m. EDT with a final report coming April 25. The market anticipates a reading of 68, according to a consensus estimate of Wall Street economists surveyed by Thomson/IFR. That's down from March's 69.5 reading, which is a 16-year low.

Economists' latest estimates ranged from 66 to 70.

Wall Street pays close attention to consumer spending because it represents about 70 percent of U.S. gross domestic product, which measures the value of final goods and services produced.

The survey consists of telephone interviews of 500 respondents, who are asked about their attitudes toward, and expectations of, the U.S. economy. The Michigan index, created in 1952, reached its lowest reading, 51.7, in May 1980, during a deep recession. In January 2000, at the height of the Internet boom, it peaked at 112.

Consumers believe the economy has already slipped into a recession, a situation fueled by a housing slump, escalating food and gas prices, tightened credit and languishing job market, according to the survey.

Federal tax rebates, expected in May, will kindle a $30 billion to $35 billion increase in spending for the third quarter, the survey said. But consumers will likely use it to repay credit cards and build up savings "so that they have the needed financial flexibility to handle any future twists and turns in the economy," Richard Curtin, the director of the Michigan survey, said in a release last month.

Shoppers have already cut back on their spending, focusing on buying basics, such as food and other essentials at discounters and wholesalers, rather than discretionary items at mall-based stores.

On Thursday, 17 retailers, including J.C. Penney Co., Gap Inc., and Limited Brands Inc., missed sales expectations for March, while only six including Wal-Mart Stores Inc. and Costco Wholesale Corp. beat estimates, according to a preliminary tally by Thomson Financial.

The data is based on same-store sales or sales at stores opened at least a year and are considered a key indicator of a retailer's health.