WASHINGTON (MNI) – The preliminary reading of U.S. consumer
sentiment fell in June, and was below expectations, according to the
Reuters/University of Michigan Consumer Sentiment survey released
Friday.

The index came in at 71.8 — no where close to median expectations
of 74.5 — vs. May’s final reading of 74.3. The consumer sentiment index
was 69.8 in April and 67.5 in March.

The index’s initial reading for consumers’ view of current
conditions in June was the lowest since October last year, reported at
79.6, down from 81.9 in May. The index was 82.5 in April, the same level
seen in March.

The early gauge of consumers’ expectations fell to 66.8 from
69.5 in May, and after 61.6 was reported for April and 57.9 in March.

Consumers’ preliminary 1-year inflation expectations for June was
4.0%, down from May’s expectation of 4.1%, and the lowest since
February. This compared with the 4.6%
expectation reported for April. Final five-year inflation expectations
rose to 3.0% vs. 2.9% last month.

The downturn in consumer’s view of current conditions comes and the
unemployment rate remains high and recent government data showed that
U.S. consumer prices saw broadbased increases in May, with the core
inflation rate accelerating at the fastest rate since July 2008.

The Bureau of Labor Statistics Wednesday reported the overall
Consumer Price Index rose 0.2% instead of staying flat as forecasters
anticipated, and the core rate rose 0.3% on the back of a variety of
high readings.

The consumer prices report showed food prices up 0.4%, food at home
up 0.5%, and sizable increases for meats, poultry, fish, cereals, eggs
and dairy.

There was also a giant increase in vacation lodging, 2.9%, despite
its small weighting, which was enough to tip the shelter index up a
tenth from its long-time path, to a 0.2% rise. In addition, prices of
both new and used vehicles rose 1.1% in May and medical care services
rose 0.3%.

All this reinforces concern that a pass-through from high energy
prices seen in the first half of the year into other consumer items
might have occurred, despite a moderation in gasoline prices so far this
month.

** Market News International Washington Bureau: 202-371-2121 **

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