Consumer Sentiment Index Drops In May To 59.5

May 16, 2008 2:19 p.m. EST

Washington, D.C. (AHN) - Consumer sentiment index during the early May period dropped to its lowest point since 1980.

The University of Michigan's index measuring the confidence among U.S. consumers fell to 59.5 in early May, from 63.2 in April, the weakest showing in almost 28 years.

"All of the early May decline was among households with incomes below $75,000," survey Director Richard Curtin said in a statement on Friday, according to Forbes.

"Record numbers of consumers viewed the economy in recession and saw little hope of recovery anytime soon," he added referring to the report showing 9 out of 10 survey respondents said the economy is in recession.

In the survey, consumers projected the inflation rate to be at 5.2 percent over the next 12 months, compared with 4.8 percent in the April report.

The International Monetary Fund has projected that the U.S. economy will expand by just 0.5 percent during this year as it goes through a mild recession in the first half of 2008.

The market analysts surveyed by Thomson's IFR Markets had expected the consumer sentiment index to fall only slightly to 62.5.

The sentiment indicates that weakening consumer spending, which is the biggest economic indicator of the country's economy, due to rising food and fuel costs; and increasing number of jobless claims.

"In short, there is not so much as a sniff of a hint of recovery here; the data continue to deteriorate," Ian Shepherdson, chief economist for High Frequency Economics, said in a statement, according to MarketWatch.

"Gas and food prices are the biggest drivers of inflation expectations, so don't expect a peak until late summer."

The expectations index declined to 51.7, which is the lowest level since 1990, compared to the index reported at 53.3 in April.

The index of current economic conditions moved down to 71.7 in early May, which is the lowest level since 1980, compared to 77.0 registered in April.