IE 11 is not supported. For an optimal experience visit our site on another browser.

Consumers pinched by high pump prices

U.S. consumer sentiment dipped in early May as record high gasoline prices weighed while more expensive crude shipments boosted the cost of imports last month, according to data released Friday.
/ Source: Reuters

U.S. consumer sentiment dipped in early May as record high gasoline prices weighed while more expensive crude shipments boosted the cost of imports last month, according to data released Friday.

Other data released Friday showed U.S. inventories grew slightly below expectations in March, implying economists are on track with upward revisions to expectations for first-quarter economic growth.

Analysts said the report was likely to reinforce views that the Federal Reserve will continued hiking interest rates at a ”measured” pace in order to head off inflationary pressures.

Although gasoline prices have eased from record highs last month, the University of Michigan said its measure of consumer sentiment slipped to 85.3 in early May from 87.7 in April, according to market sources who saw the subscription-only report.

Wall Street analysts had forecast a slight gain to 88.0.

“The consumer sentiment readings were weaker than expected and suggest that people are still not feeling good about a lot of things right now,” said Gary Thayer, chief economist at AG Edwards & Sons in St. Louis, Missouri.

“High gas prices and corporate news on autos and airlines is dampening both current conditions and expectations -- the good news is that energy prices have started to retreat and this could help confidence stabilize,” Thayer said.

Oil prices dipped to just above $48 per barrel Friday, easing from record highs over $50 per barrel through most of April.

U.S. import prices also felt the pinch of strong oil prices, rising 0.8 percent last month, the Labor Department said. The import price rise was double forecasts and compared with a revised 2.0 percent gain in March import prices.

Excluding petroleum, import prices rose by 0.4 percent in April and were 3.0 percent higher year-over-year.

Total import prices have risen 8.1 percent on a 12-month basis, the largest 12-month change since November 2004. That reflects surging petroleum costs which are up 43.1 percent since last year.

April export prices were up 0.6 percent, well above forecasts for a 0.2 percent increase, and a rise of 0.6 percent in March.

Financial markets took the news in stride, showing little reaction to the data, which included a 0.4 percent increase in business inventories in March, just below Wall Street predictions of a 0.6 percent rise.

The inventory data were not seen as strong enough to diminish the bullish first-quarter growth story portrayed by Wednesday’s trade data which showed the U.S. international trade deficit was much narrower in March than forecast.

Economists have since been revising upward their expectations for first-quarter gross domestic product from the 3.1 percent annual rate predicted in late April.

“Businesses continue to build inventories broadly in line with rising sales ... overall, first quarter GDP will be revised up by about 0.6 percentage point based on other data releases and revisions,” said Steven Wood, chief economist at Insight Economics in Danville, California.

While analysts mulled their first-quarter GDP forecasts, they downplayed the May dip in consumer sentiment in light of data released Thursday showing consumers were not afraid to open their wallets and spend in April.

Overall retail sales rose 1.4 percent in April, double forecasts of a 0.7 percent gain.

“If one has to choose, spending is more important than these (confidence) surveys,” said Lynn Reaser, chief economist at Banc of America Capital Management in Boston.