U.S. Economy: Consumer Confidence Declines as Gas Prices Surge

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U.S. Economy: Consumer Confidence Declines as Gas Prices Surge

May 12 (Bloomberg) -- Surging gasoline prices drove U.S. consumer confidence down in May by the most since hurricanes battered the Gulf Coast last year.

The University of Michigan said today its preliminary index of consumer sentiment fell to 79 from the final April reading of 87.4. The rise in oil prices also means that the trade deficit, which the Commerce Department said today unexpectedly narrowed in March, may widen again in coming months. Import prices increased in April, a third report today.

The sentiment survey is the second report in as many days to question whether consumers, whose spending rose last quarter by the most in five years, will continue to drive the economy. Gas prices are up about a third this year, countering the effect of rising wages and a jobless rate that's near a five-year low.

``If sentiment stays at this level, it might even decline further, you should expect a serious slowing in second- and third-quarter consumption,'' said Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd. in Valhalla, New York.