Consumer sentiment lowest since 1980
Index of consumer confidence at its weakest level in nearly 28 years as rising prices and a slumping economy have made Americans more cautious about spending.
NEW YORK (CNNMoney.com) -- Rising food and gas prices dragged down a consumer sentiment measure to its lowest level in nearly 28 years, according to a survey released Friday.
The Reuters/University of Michigan Surveys of Consumers index of fell to 59.8 in May, down from 62.6 in April. Economists had expected the index to decline to 59.5, according to a consensus compiled by Briefing.com.
The index has plummeted from a reading of 88.3 a year ago, and the current level is the index's lowest since June 1980.
"Consumers are painfully aware that their living standards are shrinking under the weight of higher food and fuel prices and see little hope for improvement any time soon," said survey director Richard Curtin in a statement.
Inflation concerns soared in May, reaching their highest level in more than 20 years, and long-term inflation expectations surged to a 10-year high, according to the survey. As a result, planned purchases for big-ticket items and durable goods tumbled to their lowest level in more than 14 years.
"For consumers to increase their savings, as well as cope with the higher costs of food and fuel, will require a prolonged shift in budgets away from discretionary spending," Curtin said. Half of those surveyed said their finances have recently worsened.
Americans don't expect conditions to improve anytime soon. The group's index of consumer expectations fell to 51.1 from 53.3 in April, which is far below the 77.6 reading in May 2007.
The low reading is a result of rising prices, lost jobs, falling home prices, and the continuing credit crunch, according to the study. Of the 504 people surveyed, 90% said they thought the economy was in a recession, and 75% expect economic woes to continue in the year ahead. And the number of people with concerns about the economic future of the United States reached its highest level in more than 25 years. 
