What little confidence consumers have is being undermined by the tumult on Wall Street.
Americans struggling with lean wages and job insecurity have seen their 401(k) accounts shrivel over the past 2 1/2 weeks. A plunge in oil prices has provided some relief at the pump, but not enough to lessen anxiety about the overall economy.
When consumers feel less wealthy, they're less likely to buy new furniture, new appliances or new cars. And because their spending drives about 70 percent of the economy, analysts fear a negative feedback loop in which markets and consumers drag each other down.
"We'll just scare ourselves into a recession," said David Kelly, chief market strategist with J.P. Morgan Funds.
Murray Specktor, 58, a retired Northwest Airlines pilot, said he has enough money tucked away to support himself. But with the Dow Jones industrial average more than 11 percent lower than it was less than three weeks ago, he is taking further precautions, even after the Dow surged more than 429 points Tuesday after plunging 635 points Monday.
"No expensive meals out," he said. "Entertainment's going to get cut back. Until I see where this is going, I've just got to preserve capital and try to get my comfort level up."
The drop in the stock market could cut overall spending by $140 billion, or 1.3 percent, over the coming year, said Paul Dales, senior economist at Capital Economics who forecasts that the stock market turmoil could reduce the economy's annual growth rate by half a percentage point through 2012.
In the first half of the year, the economy grew at a scant 0.8 percent annual rate. That helps explain the dive on Wall Street: Stocks are falling partly on fears that the nation could slip back into a recession.
Tumbling stock prices could especially depress spending by wealthier consumers. Eighty percent of stocks belong to the richest 10 percent of Americans. And the richest 20 percent represent about 40 percent of consumer spending. Luxury retailers that have helped sustain the economy could suffer.
Even before stocks began dropping last month, consumers weren't exactly exuberant. In June, they reduced spending for the first time in 20 months. The Rasmussen Consumer Index, drawn from a national survey, found Monday that 70 percent of Americans think the economy is worsening, up from 45 percent at the start of the year.
The stock-market drop means "people will put off spending decisions, particularly for large-ticket items, and that will reduce growth," said Brian Gendreau, a market strategist with Cetera Financial Group and a finance professor at the University of Florida.
Rob Stein, senior portfolio manager at Astor Asset Management, worries that the stock market could remain depressed for months and hurt sales during the crucial holiday season. Still, he holds out hope.
Usually, "slowdowns based on market movements are temporary," Stein said. "Just like high gas prices, you get used to it."
A lot of investors aren't waiting to see what will happen in the stock market: They're shifting money from stocks to bonds in their 401(k) accounts. On Monday, investors in the 4.7 million 401(k)s monitored by consultant Aon Hewitt transferred $1.6 billion from stocks into fixed-income investments. On a typical day, investors move $300 million to $400 million.
Families are getting some relief because gas prices are about 30 cents a gallon cheaper than they were at the start of the summer. But the benefits are tempered by the context in which these price declines come: fear of a weakening economy.
James O'Sullivan, chief economist at MF Global, takes some comfort in what happened last year. Stocks plunged 14 percent between late April and early July on fears about Europe's debt crisis. "The economy lost a bit of momentum, but it didn't go into recession, and it accelerated again before the end of the year," he noted.
Joel Naroff, founder of Naroff Economic Advisors, said the damage to consumers' psyche would have been worse years ago. But when the tech-stock bubble burst in 2000 and stocks tanked in 2008, "people lost an awful lot and became more conservative."
Yet if the selloff in stocks continues, he said, "it could convince people we're heading toward another recession" and perhaps turn the fears into reality.
Plunging stocks also hurt business confidence. Companies whose share prices have sunk can't raise as much money by issuing shares to the public. Some companies will delay initial public offerings that would have generated cash they could have used to expand and hire.
U.S. companies are sitting on about $2 trillion in cash. Economists say their reluctance to spend is a big reason the economy is still sputtering.
The stock market turmoil is likely to remind many executives of the 2008 financial crisis. Even big, profitable corporations had trouble getting short-term loans. Fears that that could happen again could give companies another reason to hoard cash.
"It just reinforces the hesitation" of companies to hire and invest," said Diane Swonk, chief economist at Mesirow Financial. The market's drop "validates large corporations' decision to hold cash."
Mainly, though, they're waiting for consumers to start spending freely again. It may take awhile.