American consumers are blue

Consumer confidence in the U.S. unexpectedly fell in June to a three-month low, adding to signs of a more restrained rebound in the second-quarter economy.

The Thomson Reuters/University of Michigan preliminary index of sentiment decreased to 81.2 from 81.9 in May. The median projection in a Bloomberg survey of 67 economists called for a June reading of 83.

Elevated fuel prices and limited wage gains are weighing on Americans’ moods and squeezing their pocketbooks even as employers add workers and cut back on firings. Figures yesterday showed retail sales cooled in May following an impressive three-month run, tempering the outlook for household spending, which accounts for about 70 percent of the economy.

“The consumer-sentiment picture really hasn’t changed very much over the past year,” said David Sloan, senior economist at 4Cast Inc. in New York. “It’s consistent with the picture that the economy is growing but not very fast.”

Estimates in the Bloomberg survey ranged from 80 to 84.5. The index averaged 89 in the five years before December 2007, when the last recession began, and 64.2 during the 18-month contraction.

Stocks fluctuated, with the Standard & Poor’s 500 Index poised for its worst week in two months, as concern about violence in Iraq offset a rally in Intel Corp. The S&P 500 rose 0.1 percent to 1,932.43 at 10:20 a.m. in New York.

Expectations weaken

The Michigan sentiment survey’s measure of expectations six months from now decreased to 72.2, also a three-month low, from 73.7 the prior month. The current conditions index, which takes stock of Americans’ view of their personal finances, rose to 95.4 this month from 94.5 in May.

Americans expect an inflation rate of 3 percent over the next year, compared with 3.3 percent in the prior month. Over the next five years, they expect a 2.9 percent rate of inflation, compared with 2.8 percent in May.

Another report today showed wholesale prices unexpectedly declined in May. The 0.2 percent drop in the producer-price index compared with a median estimate in a Bloomberg survey that called for a 0.1 percent gain. Over the past year, costs climbed 2 percent, the Labor Department’s figures showed.

“Producer price inflation is still fairly contained despite the big increases in the last few months,” Omair Sharif, a U.S. economist at RBS Securities Inc. in Stamford, Connecticut, said in a research note.

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