June 27 (Bloomberg) -- Confidence among U.S. consumers fell in June to the lowest level in 28 years as record-high gasoline and rising joblessness rattled Americans.

The Reuters/University of Michigan final index of consumer sentiment dropped to 56.4, the weakest level since May 1980, from 59.8 the prior month. The measure averaged 85.6 in 2007.

Gasoline at over $4 a gallon and rising costs for food are pinching household budgets, just as mounting job losses and falling home values raise stress levels. The report showed the inflation rate that Americans expect over the coming five years held at 3.4 percent for a second month, the highest since 1995.

``There's a whole list of headwinds facing consumers and they're not happy about it,'' Scott Anderson, senior economist in Minneapolis at Wells Fargo & Co., said in a Bloomberg Television interview.

The confidence index was forecast to fall to 56.7, according to the median of 55 economists surveyed by Bloomberg News. Estimates ranged from 55.9 to 60.0.

Earlier today, a Commerce Department report showed consumer spending in May rose 0.8 percent, reflecting rebate checks, following a revised 0.4 percent gain the prior month. Incomes grew 1.9 percent last month, the most since September 2005.

12-Month Inflation

Consumers polled by Reuters/University of Michigan said they expect an inflation rate of 5.1 percent over the next 12 months, compared with a 5.2 percent forecast in the May survey.

The survey's index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, dropped to 49.2, also the lowest since 1980, from 51.1.

A gauge of current conditions, which reflects Americans' perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, decreased to 67.6 from 73.3.

Consumers are feeling pain at the gas pump. Regular unleaded gasoline prices reached a record $4.08 a gallon at the pump on June 15, up 34 percent from the start of the year, before dropping a cent in the last two weeks.

The employment outlook also has them uneasy, as the economy has lost 324,000 jobs in the first five months of the year, the worst showing since 2003, according to the Labor Department.

Tighter Credit

Credit is getting harder to obtain, subduing demand for items with bigger price tags. Industry figures showed cars and light trucks sold at an annual pace of 14.3 million in May, the fewest in a decade.

Michael Jackson, chief executive officer at AutoNation Inc., the largest U.S. car retailer, is forecasting weak sales through the end of the year.

``My expectation is we will see a bottoming out in sales later this year,'' Jackson said in an interview June 5 with Bloomberg Television from Fort Lauderdale, Florida.

Spending may grow at an annual rate of 0.8 percent this quarter, down from a 1.1 percent pace in the prior quarter and the weakest since the first three months of 1995, according to the median estimate of economists surveyed by Bloomberg News this month. For the full year, spending will grow at a 1.5 percent pace, the weakest annual rate since 1991, according to the survey.

The bulk of the tax rebates will probably be spent from July through September, giving third-quarter growth a lift, before the economy decelerates again in the last three months of the year, the poll also showed.

The final Reuters/University of Michigan consumer confidence report reflects about 500 responses, compared with 300 households for the preliminary survey published earlier in the month.

To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net

Last Updated: June 27, 2008 10:15 EDT