NEW YORK - Soaring gas prices and weakening job prospects left shoppers gloomier about the economy in May, sending a key barometer of consumer sentiment to its lowest level in almost 16 years.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index dropped to 57.2, down from a revised 62.8 in April. Economists surveyed by Thomson Financial/IFR had expected a reading of 60.
The May reading marks the fifth straight month of decline and is the lowest since the index registered 54.6 in October 1992 when the economy was coming out of a recession.
Economists closely watch sentiment readings since consumer spending accounts for more than two-thirds of the nation’s economic activity.
“Weakening business and job conditions coupled with growing pessimism about the short-term future have further depleted consumers’ confidence in the overall state of the economy,” Lynn Franco, director of the Conference Board’s Consumer Research Center, said in a statement.
Franco said consumers’ worries about inflation, fueled by increasing prices at the gas pump, are now at an “all-time high” and are likely to rise further in the months ahead. She added that based on consumers’ outlook on the economy, she believes there’s little likelihood of a quick turnaround.
Mark Vitner, senior economist with Wachovia Corp., agreed, saying that as “awful as these numbers” look, he doesn’t believe that confidence has bottomed out yet, an ominous sign for consumer spending.
“Higher gasoline is of immediate concern,” Vitner said. “ A lot of the extra money is going toward gas and food.” And he doesn’t see consumer sentiment improving until gas prices start receding.
The Conference Board index that measures shoppers’ current assessment of economic conditions declined to 74.4 in May from 81.9 in April. The index that gauges their outlook over the next six months declined to 45.7 from 50.0 in April.
The downbeat news came as investors received mixed news about the housing market. A closely tracked Standard & Poor’s/Case-Shiller index showed that housing prices dropped at the sharpest rate in two decades during the first quarter, indicating that the housing slump continues to deepen.
The S&P/Case-Shiller national home price index fell 14.1 percent in the first quarter compared with a year earlier, the lowest since its inception in 1988. The quarterly index covers all nine U.S. Census divisions.
But the Commerce Department announced that sales of new homes rose in April for the first time in six months, although the unexpected increase still left activity near the lowest level in 17 years.
Sales of new homes rose 3.3 percent in April to a seasonally adjusted annual rate of 526,000 units.
Prices edged higher on Wall Street, but were below the day’s highs. The Dow Jones industrial average rose 5.54, or 0.04 percent, to 12,485.17. The blue chip index had been up by about 60 points.
Broader stock indicators were slightly higher. The Standard & Poor’s 500 index rose 1.02, or 0.07 percent, to 1,376.95; the Nasdaq composite index rose 10.37, or 0.42 percent, to 2,455.04.Investors have been uneasy about soaring gas prices and its impact on the economy and consumer spending.