June 27, 2008 / 1:56 PM / 10 years ago

Inflation and job losses keep consumers glum

NEW YORK (Reuters) - Consumer confidence fell more than expected in June, hitting another 28-year low as surging prices and mounting job losses contributed to a bleak outlook, according to a survey released on Friday.

Shoppers carry their purchases along Broadway in New York City, May 11, 2008. REUTERS/Joshua Lott

The Reuters/University of Michigan Surveys of Consumers said five-year inflation expectations remained steady at the peak of 3.4 percent reached in May, which was the highest in 13 years.

Federal Reserve officials have focused on long-term inflation expectations and the persistence of such pressures heightens their dilemma — whether to fight price growth or support a weak economy in the grips of the worst housing slump since the Depression of the 1930s.

The Surveys of Consumers said the final June reading for its index of confidence fell to 56.4 from May’s 59.8. The report said the pace of consumer spending is likely to sink at least through the start of 2009.

“Moreover, gas prices have risen to an all-time peak, food prices posted the largest increases in decades, home prices have fallen faster than any time since the Great Depression, and there has been widespread distress associated with foreclosures,” the report added.

Also weighing on consumers, data earlier this month showed U.S. employers shed jobs for a fifth straight month in May and the unemployment rate jumped to 5.5 percent, its highest in more than 3-1/2 years.

Economists had expected a reading of 57.0, according to a Reuters poll. Their forecasts ranged from 55.9 to 60.0. The final June result is slightly below the preliminary figure of 56.7 released on June 13.

“Overall, no new information, only confirmation of prevailing weak sentiment,” analysts at RBS Greenwich Capital said in a note to clients about the report.

Financial markets showed little immediate reaction to the report. Stocks were flat and the dollar was down against the yen. Government bonds were higher on the day.

The June reading is the lowest since 51.7 in May 1980, which was also the lowest reading ever. The index dates back to 1952, though the survey has been conducted since 1946.

One-year inflation expectations declined to a still-elevated 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 49.2 in June — its lowest since May 1980. This was down from May’s 51.1.

Meanwhile, the index of current personal finances fell to 69 in June — the lowest on record — from 80 in May.

Editing by Jonathan Oatis

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below