AMERICAN consumers' legs are turning to jello.
Traffic in model homes and car showrooms is drying up. Department stores are slashing prices to try to generate sales. And appliance manufacturers are scaling back their projections as they watch sales of washers and dryers drop off.
Some of the slowdown is the direct result of the rise in interest rates since February 1994. But recently interest rates have started to tumble. On Monday, long-term interest rates fell below 7 percent for the first time in more than a year. Economists say this could begin to stimulate the economy later this year.
Consumers, however, are also starting to lose confidence in the economy and their ability to hold a job.
''There is a broad move towards more cautious household spending,'' says Robert Dederick, an economic consultant to Northern Trust Company in Chicago.
''The bond market is saying there will be no more Fed tightening, and the Fed may actually cut the rates and fairly soon,'' explains Peter D'Antonio, senior economist at Citibank. Mr. D'Antonio says one early indication that the falling rates will revive the economy is an increase in mortgage loan applications.
Optimism, in fact, still prevails in some of the official forecasts for economic growth. On Tuesday, Laura D'Andrea Tyson, assistant to President Clinton for economic policy, said ''the outlook continues for fine economic performance'' led by corporate spending on new plants and equipment.
Most economists believe the economy remains fundamentally sound even if the consumer is fatigued. In a survey released yesterday, Blue Chip Economic Indicators reports that the consensus forecast of 50 economists is for inflation-adjusted growth in output of 3.2 percent in 1995.
A number of economists, however, are now predicting that tepid consumption will drag the economy down over a significant portion of the year. Economists David and Jay Levy recently predicted a ''tough six months of unsatisfactory profits, stubbornly high inventories, weaker labor markets, and anxiety.''
Consumer caution was reflected last week in disappointing attendance at the furniture industry's annual nine-day sales event at High Point, N.C.
Although attendance was down, ''buyers were guardedly optimistic,'' says Douglas Fenn, president of Tell City Chair Company in Tell City, Ind.
A survey of the members of the American Furniture Manufacturers Association found that shipments for the first three months of the year were up 7 percent, Mr. Fenn says. New orders had risen by only 3.5 percent, however.
''No question inventories are rising,'' says Fenn, who is also president of the association.
The furniture industry is not alone in coping with rising inventories. On Tuesday, the Labor Department reported inventories rose 1.2 percent in March.
The slow sales are particularly noticeable in automobile showrooms. Total car sales so far this year are down about 8 percent from the same period last year. It could be worse, says auto analyst Susan Jacobs of Jacobs & Associates in Rutherford, N.J. ''The numbers mask the fact we have had substantial incentive activity in March and April.''
The University of Michigan consumer surveys indicate one of the reasons why potential auto buyers are balking is higher sticker prices.
''Consumers are just postponing and withdrawing from the market,'' says Richard Curtin, director of the surveys.
In the past, consumers could shift to less expensive foreign cars. However, with the weak US dollar and the strong yen, Japanese models are rising in price even faster than domestic cars.
Yesterday, there was the likelihood that some Japanese minivans might become even more expensive with the US plan to slap tariffs on some $1 billion in Japanese products, such as vehicles and auto parts. The tariffs are part of a trade dispute over US export of autos and parts to Japan.
Appliance sales slow
Consumers also seem to be losing interest in buying appliances. ''The feedback I am getting is that there is certainly a sense of softening, and companies are beginning to prepare for that,'' says Bob Holding, president of the Chicago-based Association of Home Appliance Manufacturers.
Last week, for example, General Electric announced it was laying off 800 employees at its Appliance Park facility in Louisville, Ky. The workers, who had been hired in 1993, were considered ''temporary'' workers by GE.
If lower interest rates do spark the economy, the revival will come at a good time for the housing industry. Housing starts are expected to fall 9 percent in the second quarter compared with the second quarter of last year.
For the year, the National Association of Home Builders is predicting a decline of 10 percent in new housing starts.
In its April survey of members, the NAHB found that showroom traffic had declined substantially. ''Evidently people are concerned about the economy, the job market, and income growth,'' says Gopal Ahluwalia, an economist with NAHB.
With mortgage rates falling to about 8.25 percent, he says, ''Hopefully, people will start to realize this is an attractive rate.''