Consumers' mood sinks in June: survey

By Burton Frierson

NEW YORK (Reuters) - U.S. consumer confidence tumbled more than expected in June, hitting another 28-year low as high inflation and rising unemployment added to the gloom, according to a survey released on Friday.

Five-year inflation expectations held steady on May's peak, which was the highest in 13 years. Federal Reserve officials have focused on long-term inflation expectations in recent comments expressing concern about inflation in general.

And more consumers than ever before in the survey's 62-year history said their financial situation had worsened, according to the Reuters/University of Michigan Surveys of Consumers.

The survey also said one-year inflation expectations declined slightly, though they remained just off their highest level in 26 years.

The Surveys of Consumers said the June reading for its index of confidence fell to 56.7 from May's 59.8. The June reading is the lowest since 51.7 in May 1980, which was the lowest reading on record for the index.

"Consumer sentiment was much worse than expected. Consumers are definitely not feeling good about the economy," said Gary Thayer, senior economist at Wachovia Securities in St. Louis, Missouri. "They see rising gas prices, falling home prices and higher unemployment."

On Wall Street, stocks briefly came off their highs but later revisited their peaks with the help of retreating oil prices as well as advancing technology and financial shares.

The dollar pared its gains against the euro but was not far off the day's highs against the European currency.

U.S. Treasury debt, which benefits from weak economic conditions, posted modest gains.

The median forecast of economists for the index was 59.5, according to a Reuters survey. Forecasts ranged from 55.0 to 63.1.

The report's gauge of five-year inflation expectations held steady at May's peak of 3.4 percent, which was the highest since April 1995.

One-year inflation expectations declined to 5.1 percent from May's 5.2 percent. May's one-year inflation expectations reading was the highest since 5.2 percent in February 1982.

The index of consumer expectations fell to 49.0 in June -- its lowest since May 1980. This was down from May's 51.1.

Meanwhile, the index of current personal finances fell to 65 in June -- the lowest on record -- from 80 in May.

In the survey, just 25 percent of respondents rated their financial situation as better than a year ago, the lowest in 27 years.