Consumer confidence plunged in February as Americans worried about less favourable business conditions and job prospects, a business-backed research group said Tuesday.

Inflation at the wholesale level in January was also higher than expected at 1.0 per cent the US Labour Department reported - compared to the 0.4 per cent, analysts had expected - pushed higher by rising costs for food, energy and medicine.

The Conference Board said its Consumer Confidence Index fell to 75.0 this month from a revised 87.3 in January.

The reading was the lowest since the index registered 64.8 in February 2003, just before the U.S. invaded Iraq, researchers said, and was far below the 83.0 expected by analysts surveyed by Thomson/IFR.

Consumers shaken

The measures how consumers feel about the economy.

Consumers have been shaken by a prolonged slump in housing that has pushed the country close to a recession.

A third report Tuesday showed that home prices, measured by the S&P/Case-Shiller Index, dropped by 8.9 per cent in the fourth quarter of last year, the steepest drop in the 20-year history of the index.

"Home prices across the nation and in most metro areas are significantly lower than where they were a year ago," said Robert Shiller, one of the index's creators. "Wherever you look, things look bleak."

The consumer confidence index has been weakening since July, suggesting that wary consumers may retrench financially, which could fatigue the economy further.