Consumer sentiment plunged in July to its lowest level in 9 months on bleak prospects for jobs and income a year since the economic recovery began, a private survey released on Friday showed.

There was a slim improvement in late July from early July, but the month-over-month deterioration in confidence signaled weak consumer spending in the months ahead, according to Thomson Reuters/University of Michigan's Surveys of Consumers.

This consumer report followed the government's initial estimate on the second-quarter gross domestic product growth, which slowed to a 2.4 percent annual pace from a 2.7 percent rate in the first quarter.

July's reversal in consumer sentiment was dramatic after it hit its strongest level nearly 2-1/2 years last month, prompted by hopes of better job and credit conditions.

Rather than an economy gaining strength, consumers now anticipate a slowing pace of growth, and rather than economic policies acting to improve prospects, economic uncertainty among consumers has greatly increased, Richard Curtin, director of the surveys, said in a statement.

The survey's final July reading on the overall index on consumer sentiment dropped to 67.8 from 76.0 in June. This compared with an early July figure of 66.5 and a median forecast of 67.0 among economists polled by Reuters.

This steep pullback in sentiment is ominous for the U.S. economy, which is showing signs of slowing. Consumer spending accounts for 70 percent of the U.S. economy.

In the government's latest GDP report, consumer spending grew 1.6 percent in the second quarter, compared with 1.9 percent in the first quarter.

The latest survey showed favorable attitudes to buy durable items like cars fell to 58 percent in July from 67 percent in June. The drop reversed nearly all the gains in the past year.

Overall, the survey data suggest that the current slowdown in spending is likely going to persist well into 2011, Curtin said.

The survey's barometer of current economic conditions fell to 76.5, the lowest since November 2009. This compared with 75.5 reported earlier this month and 85.6 in June, which was the highest since March 2008. Analysts had predicted an end-July figure of 76.0.

The survey's gauge of consumer expectations slipped to 62.3, the lowest since March 2009. This compared with 60.6 in early July and 69.8 in June; analysts had predicted a reading of 61.3 in late July.

The measure on consumers' 12-month economic outlook plunged to 66 in late July, which was the lowest since April 2009. It stood at 65 in early July and 79.0 in June.

Amid jitters over jobs and household finances, consumers expected short-term inflation to ease in the coming months.

The survey's one-year inflation expectations measure dipped to 2.7 percent in July from 2.8 percent in June, but the five-to-10-year inflation index firmed to 2.9 percent from June's 2.8 percent.

(Reporting by Richard Leong; Editing by Padraic Cassidy)

Michigan Inflation