Consumer confidence fell to a 28-year low

This is certainly not good. From MSNBC News:

NEW YORK - Consumer confidence fell to a 28-year low in May as inflation expectations soared, according to a survey released on Friday that presents a dilemma for the Federal Reserve.

The Reuters/University of Michigan Surveys of Consumers said the final reading in May for its index of confidence fell to 59.8 from April's 62.6, slightly above the median expectation of 59.5 in a Reuters survey of economists.

May's reading was the lowest since 58.7 in June 1980 but it was slightly higher than the preliminary reading of 59.5 published earlier this month.

However, the improvement was marginal and the report still paints a troubling picture, with one-year inflation expectations surging to 5.2 percent -- the highest since February 1982 -- from 4.8 percent in April.

Worse yet, five-year inflation expectations jumped to 3.4 percent, the highest since April 1995. In April this year they were at 3.2 percent.

The inflation measures challenge the Fed's view that soaring commodity prices have not yet led to an increase in long-term expectations for price growth. They also take the shine off encouraging inflation data earlier on Friday.

The government's core personal consumption expenditures price index, which excludes food and energy prices, showed underlying inflation slowed on a monthly basis in April, even though it remains above the Fed's perceived comfort zone on an annual measure.

The report heightens worries that the United States could be entering a period of stagflation like the late 1970s and early 1980s, characterized by a sluggish economy and accelerated price growth.

American consumers are getting squeezed by high gas and food prices, falling home prices, and big worries over whether they will have a job or not. American consumers no longer have confidence in this U.S. economy, and perhaps are even worried that stagflation is hitting them this year--when gas prices have increased to $4.00 a gallon, is it no wonder that Americans are in such a foul mood? And because of this loss of consumer sentiment, I'm expecting consumer spending will start dropping over the course of the summer and possibly into the fall. Consumer spending increased by 0.4 percent in March, followed by 0.2 percent in April. However, economists believe this increase in consumer spending could be reflecting increases in energy costs and food prices--in other words, inflation. Excluding inflation, consumer spending would have been flat in April. If the U.S. economy continues to go down the tubes, it may be more difficult for Republican Senator John McCain to become elected into a third Bush term.

More to come.