US consumer sentiment plunges the most in over 2 yrs

[WASHINGTON] Consumer confidence unexpectedly fell in May by the most in more than two years as Americans' views on the economy dimmed.

The University of Michigan preliminary index of sentiment dropped to 88.6, the lowest since October, from 95.9 in April. The 7.3 point decrease was the largest since Dec 2012. The outcome was lower than the lowest estimate of 68 economists surveyed by Bloomberg.

News that the world's largest economy stalled last quarter shook Americans' outlook, while the tick up in fuel costs since early March also contributed to the gloomier perceptions. While slightly lower than in the prior month, households still held relatively upbeat views on incomes, a sign spending will be sustained.

"The decline was widespread among all age and income subgroups as well as across all regions of the country," Richard Curtin, director of the Michigan Survey of Consumers, said in a statement. "To be sure, the recent decline in consumer confidence does not indicate an incipient downturn in consumption and residential investment. Rather the data indicate a reluctant acceptance on the part of consumers that economic growth will remain near the same lackluster pace recorded during the past several years."

The index has shown bigger declines than in May in only 20 months since the monthly surveys began in 1978.

The sentiment survey's current conditions index, which takes stock of Americans' view of their personal finances, fell to 99.8 from the prior month's 107.

The measure of expectations six months from now decreased to 81.5 from 88.8.

"The data nonetheless suggest that consumers remain optimistic about their future personal finances and have maintained their buying plans are reasonably favorable levels," Mr Curtin also wrote.

Americans expect the inflation rate in the next year will be 2.9 per cent, compared with 2.6 per cent in the April survey. Over the next five to 10 years, they expect a 2.8 per cent rate of inflation, compared with 2.6 per cent in the previous month.

BLOOMBERG