Prices increase; Consumer confidence in the crapper

from Bloomberg:



U.S. Economy: Consumer Prices Increase, Sentiment Deteriorates

By Shobhana Chandra

June 13 (Bloomberg) -- U.S. consumer prices rose more than forecast in May as record oil prices reduced American confidence to the lowest level since Jimmy Carter was in the White House.

The consumer price index increased 0.6 percent, the most since November, after a 0.2 percent gain the prior month, the Labor Department said today in Washington. The Reuters/University of Michigan preliminary index of consumer sentiment fell to 56.7 in June, a reading unseen since 1980, from 59.8 in May.

The slump in confidence may prevent Federal Reserve officials from rushing to raise interest rates to stem the pick- up in inflation. Most economists anticipate Chairman Ben S. Bernanke and his colleagues will wait until next year to boost borrowing costs, according to a monthly Bloomberg News survey.

``The Fed is in a terrible situation here,'' Michael Darda, chief economist at MKM Partners LP in Greenwich, Connecticut, said in an interview with Bloomberg Television. ``We are certainly in a slow period'' and ``the Fed is talking tough on inflation.''

...(snip)...

The Reuters/University of Michigan's index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, fell to 49 in June, from 51.1 in May.

Its gauge of current conditions, which reflects Americans' perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, dropped to 68.7 from 73.3 the prior month.

``The outlook going forward has really plummeted, which indicates that really the major concern now is expectations after the summer,'' said Jeffrey Roach, chief economist at Horizon Investments in Charlotte, North Carolina. ``If those pressures remain, that's where the consumer is really going to be closing up their wallets and trying to wait it out.'' .....(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=aVES0jYQjQTs&refer=home