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Consumer Sentiment in U.S. Decreases to a Three-Month Low (2)

June 13 (Bloomberg) -- 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.

Bloomberg Measure

Today’s sentiment figures are at odds with some other measures. The Bloomberg Consumer Comfort Index climbed to a five-week high of 35.5 in the period ended June 8, figures showed yesterday. The measure of the state of the economy rose to a six-week high, and the gauges of personal finances and whether this is a good time to make purchases also advanced.

The job market continues to make progress, with payrolls in May exceeding the pre-recession peak for the first time, according to Labor Department data released last week. Employment grew by 217,000 after increasing by 282,000 in April. It marked the fourth consecutive month of gains of more than 200,000, the first time that’s happened since early 2000. The jobless rate held at an almost six-year low of 6.3 percent.

One bright spot for spending is motor vehicle demand. Cars and light trucks sold at a 16.7 million annualized rate in May, the strongest since February 2007, according to Ward’s Automotive Group.

Restoration Hardware Holdings Inc., a seller of furniture, linens and home furnishings, is among retailers benefiting from the housing recovery. The Corte Madera, California-based company boosted estimates for annual sales and per-share earnings after first-quarter revenue jumped 22 percent from a year earlier.

Business Sentiment

“The business momentum and strong trends we are seeing thus far in 2014 give us further confidence in our financial outlook for the year,” Gary Friedman, chairman and chief executive officer, said in a statement on June 11.

At the same time, some indicators of the labor market are improving only gradually. Wage growth is sluggish, and the number of people unemployed for 27 weeks or longer as a share of the total jobless is still above its pre-recession level.

More expensive fuel is a restraint on household budgets. The cost of regular-grade gasoline, at $3.65 a gallon this week, is hovering close to the 2014 high of $3.70 reached in April.

Some businesses catering to bargain shoppers have yet to see an improvement in demand. Wal-Mart Stores Inc., the world’s largest retailer, last month forecast second-quarter profit that missed analysts’ estimates as it copes with slow sales in the U.S., especially at its Sam’s Club warehouse stores.

More recently, Wal-Mart U.S. Chief Executive Officer William Simon said on a June 6 call that customers in the income segments served by the discount retailer remain “challenged.”

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