By Chris Cermak

WASHINGTON (MNI) – The University of Michigan Consumer Sentiment
Index is expected to remain near a six-month low when the final April
numbers are released Friday as rising gas prices continue to weigh on
consumers minds and push up inflation expectations.

Consumer sentiment is forecast to hold at the preliminary reading
of 69.6, according to a survey of economists by Market News
International. Up from 68.2 in March, the increase was led by the
surveys expectations component, which rose 2.9 points to 61.2 in April,
while the current conditions index dropped 0.9 points to 82.7.

Consumers have been uneasy in recent months as rising crude oil
prices have pushed up prices at the pump to near their summer 2008
record highs. At 3.879 dollars per gallon, the Energy Information
Administrations weekly average is at its highest level since July 2008.

Inflation expectations over the next 12 months stood at 4.6% in
both April and March in the University of Michigan’s survey, the highest
level since August 2008, while five-year inflation expectations fell to
2.9% in Aprils preliminary numbers.

But Michael Moran of Daiwa Capital Markets America said the higher
energy costs have yet to have a significant impact on households’ buying
habits. While advance first-quarter GDP released Thursday was weak at
1.8%, consumer spending was growing at a healthy rate of 2.7%.

“Consumers are seeing the increase in energy prices as a temporary
phenomenon related to conditions in the Middle East, North Africa,”
Moran said in an interview. “It takes a while for something like an
energy price shock to slow consumer spending.”

The Federal Reserve has acknowledged that gas prices are weighing
on consumers minds and pushing up short-term inflation expectations,
but in a statement from the Federal Open Market Committee Wednesday
repeated its belief that the effects on inflation will be “transitory.”

“The combination of high unemployment, high gas prices and high
foreclosure rates is a terrible combination,” Fed Chairman Ben Bernanke
said in his first-ever post-FOMC press conference on Wednesday. “People
are having a tough time. I can certainly understand why people are
impatient.”

The rival Conference Boards index of consumer confidence released
Tuesday rose to 65.4 in April from 63.8 the previous month. Lynn Franco
from the Conference Board said uncertainty among consumers, which spiked
in March, appeared to be “easing” this month.

The final reading of the consumer sentiment survey will be released
at 9:55 a.m. ET by the University of Michigan. The preliminary survey
was released April 15.

— Chris Cermak is a reporter with Need to Know News

** Market News International Washington Bureau: 202-371-2121 **

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