Consumer Sentiment Hits 10-Month Low Amid High Gas Prices

Published June 15, 2007

| Reuters

U.S. consumer sentiment dropped more than expected in June to its weakest in 10 months, as higher gasoline prices dampened consumers' mood and pushed up their expectations of inflation in the near-term.

The Reuters/University of Michigan Surveys of Consumers said the preliminary reading on the June consumer sentiment index showed a decline to 83.7 from 88.3 at the end of May.

The decline was much sharper than forecast by economists, who had expected a median reading of 88.0 in a Reuters poll.

The decline in consumer confidence in June was "hardly surprising", the Reuters/University of Michigan survey said, however, noting that U.S. gasoline prices have topped $3 per gallon for six straight weeks.

"It is a bit disappointing, but understandable, given the weight of higher gasoline prices," said Cary Leahey, senior managing director at Decision Economics in New York. "A little increased near-term inflation jitters and people are obviously concerned about the outlook."

Financial markets took the number in their stride, with stocks holding on to solid gains and U.S. Treasury bonds also rallying after a tame reading on U.S. inflation earlier in the day.

The survey's gauge of current consumer conditions was 100.2 in June versus a May reading of 105.1, while its final measure on consumer expectations was 73.0 versus 77.6 at end-May.

Its one-year inflation index edged up to 3.5 percent, the highest in 10 months, from 3.3 in late May. The five-year index, however, edged down to 3.0 percent from 3.1 percent.

The survey said that although 1-year inflation expectations had edged up, "the data still indicate that consumers do not anticipate an escalating core inflation rate."

The Reuters/University of Michigan Surveys of Consumers, a monthly series of data on U.S. consumer sentiment, are produced by the University of Michigan in Ann Arbor, Michigan. From January 2007, Reuters has exclusive rights to distribute the data.

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