NEW YORK – U.S. consumer sentiment plunged to a seven-month low in May, with a cut in current conditions and consumer expectations as high energy prices took their toll on consumers' moods, a report showed Friday.
The University of Michigan's preliminary May index of consumer sentiment was 79.0, down from April's final reading of 87.4, said sources who saw the subscription-only report.
The May reading was the weakest since October 2005, when sentiment hit a 12-year low just after hurricanes Katrina and Rita devastated U.S. southeast petroleum refining capacity and gasoline prices spiked.
The median forecast of Wall Street economists polled by Reuters was for a preliminary May reading of 86.1.
"The big drag must be higher gasoline prices," said Richard Iley, senior economist at BNP Paribas. "Job security is holding up reasonably well, but expectations on housing, stocks and gasoline are looking pretty harmful for the consumers."
Last week, retail gasoline prices fell for the first time in six weeks to $2.91 per gallon, but they were still 72 cents higher than a year ago, the Energy Information Administration said Monday.
The survey's index of current conditions dropped to 96.2 in May from 109.2 in April, while consumer expectations fell to 68.0 from 73.4.
U.S. Treasury debt prices recovered some ground Friday immediately after the release of the University of Michigan survey, while stocks also pared some losses.
Consumer spending accounts for about two-thirds of all U.S. economic activity, but in recent years confidence measures have been a weak guide to actual spending plans.
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