Trade gap narrows, but consumers wary

By Doug Palmer

WASHINGTON (Reuters) - The U.S. trade deficit narrowed unexpectedly in February in a positive sign for the economy, but rising gasoline prices and troubles in the housing market knocked consumer sentiment to its lowest in eight months this month, according to reports on Friday.

The February trade gap fell to $58.4 billion, as crude oil imports fell sharply to the smallest in four years and average imported oil prices were the lowest since December 2005, a government report showed.

The Reuters/University of Michigan Surveys of Consumers said the preliminary April reading of its consumer sentiment index slid to 85.3 from 88.4 in March.

The April result was the lowest since 82.0 in August 2006 and marked the third straight fall in the index.

"Consumer confidence declined in early April due to rising gas prices and falling home prices," a statement accompanying the Reuters/University of Michigan data said.

"Surprisingly, for the second month, the entire loss was among upper-income households."

The sentiment survey also showed its one-year inflation index popping to 3.3 percent in April after holding steady for three months at 3.0 percent.

"This is one of the cyclical difficulties we are stuck in. Growth is not where we want (it) to be and we continue to have inflation problems," said Robert Brusca, chief economist at Fact and Opinion Economics in New York.