April 9 (Bloomberg) -- United Parcel Service Inc. fell 3.7 percent in New York trading, the most since July 2006, after the world's largest package-delivery company said it will report lower first-quarter profit than estimated.

UPS dropped $2.74 to $70.57 at 4:01 p.m. in New York Stock Exchange trading. FedEx Corp., the second-largest U.S. package shipper, slid 3.1 percent to $93.11.

UPS pared its per-share profitforecast yesterday to as low as 86 cents from 94 cents to 98 cents as fuel costs rose and a sagging economy weighed on premium-priced air shipments to consumers. U.S. growth will stall in this year's first half as consumer spending slows, a survey of economists showed today.

``I don't think they misread anything. The market just got a lot weaker and oil prices shot up more aggressively than they thought,'' John Barnes, a Richmond, Virginia-based analyst at BB&T Capital Markets, said in a Bloomberg Television interview. Package shippers are ``going to have to provide guidance with the assumption that oil prices are going to stay this high for the foreseeable future.''

Chief Financial Officer Kurt Kuehn said last month that a slowing U.S. economy may make it difficult for the company to meet its first-quarter earnings target. Air deliveries, which are among its most profitable services, are falling faster than ground shipments, Kuehn said at the March 12 investor presentation.

Estimates

UPS is scheduled to report first-quarter results April 23. The average estimate of 15 analysts surveyed by Bloomberg is 88 cents, down from 94 cents yesterday before UPS lowered its forecast.

``Parcel carriers' greater exposure to consumer spending will be problematic given the macro backdrop,'' Morgan Stanley analyst William Greene said in a note to clients today. He lowered his first-quarter estimate for the company by 8.5 percent, to 86 cents.

This was the third time that UPS has lowered its forecast since the company's initial public offering in 1999, spokesman Norman Black said yesterday. The first time was after the Sept. 11, 2001, terrorist attacks, and the second time was in late 2004, after winter storms and lower-than-forecasted volume reduced profit.

A slowdown in consumer spending will help bring U.S. economic growth to a halt from January through June, according to the median estimate of 62 economists surveyed from April 2 to April 8. A majority now projects the U.S. is, or will soon be, in a recession.

Consumer spending, which accounts for more than two-thirds of the economy, will rise at an average annual pace of 0.5 percent in the first half of the year, the survey showed. That would be the smallest two-quarter gain since it dropped in the six months that ended March 1991.

Jet fuel for immediate delivery in New York Harbor has climbed 79 percent in the past year. Regular unleaded gasoline averaged $3.34 a gallon on April 7, about 20 percent higher than a year earlier, according to figures from AAA.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net.

Last Updated: April 9, 2008 16:42 EDT