- The Washington Times - Tuesday, May 30, 2006

NEW YORK (AP) — Consumer confidence soured in May, as Americans fretted about the overall economy’s future and the jobs outlook. The drop in a widely watched barometer of sentiment was the steepest since hurricanes pummeled the Gulf Coast last year, increasing worries about the health of consumer spending.

The New York-based Conference Board said yesterday its consumer confidence index fell almost seven points to 103.2, down from the revised 109.8 in April. Still, May’s reading was better than the 100.9 expected by analysts.

The decline stalled a rebound seen since November in the aftermath of last year’s Gulf of Mexico hurricanes, which sent the index down 18 points in September. The exception was a dip in February when short-lived pessimism over the job market hurt consumer sentiment.

“Consumer confidence, which reached a four-year high in April, lost ground in May,” said Lynn Franco, director of the New York-based Conference Board Consumer Research Center. “Apprehension about the short-term outlook for the economy, the labor market and consumers’ earning potential has driven the Expectations Index down to levels not seen since the aftermath of the hurricanes last summer.”

Still, Miss Franco said, consumers rate current conditions favorably.

The Expectations Index, which measures consumers’ outlook over the next six months, fell to 83.7 in May from 92.3 in April. In fact, the proportion of consumers expecting their incomes to rise in the months ahead fell to the lowest level in three years, the survey reported. The Present Situation Index, which measures how shoppers feel now about economic conditions, slipped to 132.5 from 136.2.

Economists closely monitor consumer confidence because consumer spending accounts for two-thirds of all U.S. economic activity.

The setback in confidence in May — while anticipated amid higher energy costs — is discouraging for retailers, which have seen sales slow during the month. In fact, Wal-Mart, the world’s largest retailer, expects May sales at stores open at least a year to rise a modest 2.3 percent, at the low end of expectations. It cited high gasoline prices as a big factor. Wal-Mart and other major merchants are slated to report monthly results tomorrow.

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