Consumer Confidence Hits 16-year Low in May

NEW YORK (Reuters)- Consumer confidence plunged unexpectedly to its lowest in 16 years inMay as rising gasoline costs and falling home prices made Americansnervous about the future, a survey released on Tuesday showed.

The Conference Board, an industry group, said its monthly measure ofconsumers’ mood fell to 57.2 from 62.3 in April, well below WallStreet’s median estimate of 60.0.

"There is a fear the economy is in a recession or going into one andpeople may find their jobs in jeopardy," said David Coard, head offixed-income sales and trading at The Williams Capital Group in NewYork.

"When you talk to people on the street they seem to be really beingsqueezed at the pump and the supermarket while their income isn’tkeeping up."

The index has dropped by almost half since last July, when housingmarket troubles triggered the most severe credit crisis in at least adecade.

At the same time, inflation expectations rose to an all-time high 7.7 percent, well above April’s 6.8 percent.

The pain was felt across the board, with consumers worried aboutboth what is happening now and what might be to come. The presentsituation index dropped to 74.4 from 81.9, while the expectationsbarometer dived to 45.7 from 50.0.

Other reports out on Tuesday suggested the housing market will notget better any time soon. New home sales rose but only after downwardrevisions to the prior month, and remained near their weakest in morethan 15 years.

Meanwhile prices of single-family homes plunged a record 14.1percent in the first quarter from a year earlier, marking a pace fivetimes faster than the last housing recession, according to the Standard& Poor’s/Case Shiller index.

"Weakening business and job conditions coupled with growingpessimism about the short-term future have depleted consumers’confidence in the overall state of the economy," said Lynn Franco,director of The Conference Board Consumer Research Center.

(Additional reporting by John Parry; Editing by James Dalgleish)