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US consumer sentiment weakens in May

Consumer sentiment in the U.S. weakened in May as consumers remained focused on expected gains in jobs and incomes along with likely increases in interest rates and inflation, according to final data from a University of Michigan survey.

The index of consumer sentiment slipped 0.8 of a percentage point to a final reading of 98.0 in May, from 98.8 last month. The initial reading for May was 98.8.

The current economic conditions index fell 2.7% to 111.8 from 114.9, while the index of consumer expectations rose 0.8 of a percentage point to 89.1 from 88.4.

"As past expansions have shown, rising interest rates do not suppress spending gains as long as they are accompanied by more substantial increases in incomes," said Richard Curtin, Survey of Consumers chief economist. "The May survey, however, found that consumers anticipated smaller income gains than a month or year ago, even though they anticipate the unemployment rate to stabilize at its current eighteen year low."

Curtin also noted that survey respondents' references to discounted prices for durable goods, vehicles and houses hit lows not seen in a decade. "Coupled with higher interest rates, it is likely that the pace of growth in personal consumption will remain at about 2.6% during the year ahead," he said.